Wednesday, December 17, 2008

BCBS of Michigan Tries to Pry Itself From Under Regulation

From the Kaiser Network:

Blue Cross Blue Shield of Michigan is urging the state Legislature to pass legislation that would give the insurer more flexibility in setting premium rates and reduce government regulation, the Wall Street Journal reports. The insurer said that without the changes, increasing per-member costs will lead to financial troubles. As the state's insurer of last resort, BCBS is exempt from $80 million to $110 million in state and local taxes annually in exchange for providing affordable health coverage to all applicants, including those rejected by private insurers. The firm claims that as more people in the state have lost their jobs or employer-sponsored insurance, the number of BCBS policyholders has doubled in the past two years. It says that because it cannot reject any applicants, its per-member costs are four times those of private insurers. BCBS says the company likely will have a $166.5 million loss on individual products in fiscal year 2008 and a $264 million loss in FY 2009.

In addition, BCBS is asking that other insurers be charged a "cherry-picking" penalty for rejecting applicants who end up with BCBS -- which would go to BCBS to help fund their coverage. A version of the firm's proposal was passed last year by the state House and another -- from which some of the more "dramatic" proposals were removed -- was passed this spring in the Senate, the Journal reports. A vote on a final version could be taken this week.

Other insurers, the Michigan attorney general and consumer groups have spoken out against the requests, saying the legislation would allow BCBS to charge higher premiums to sick customers and shirk its social responsibility. Richard Murdock, executive director of the Michigan Association of Health Plans, said, "This does nothing for Michigan's uninsured population, and it only raises the possibility of the worst-case scenario of higher premiums." State Attorney General Mike Cox (R) said that the firm is exaggerating its problems, noting that its reserves have increased by more than $2.96 billion from 2001 to 2007. He also said the firm has been able to cover its losses on individual products in the first nine months with other income and has recorded $110 million in profit (Fuhrmans/Martinez, Wall Street Journal, 12/4).

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