BC Raises Costs Of Individual Health Plans in Michigan
Story from the Detroit News

As more Michigan residents flock to Blue Cross Blue Shield of Michigan to buy their own health coverage, the state's largest insurer is replacing several types of individual policies with plans that will cost up to $600 a year more -- and come with higher co-payments and other out-of-pocket costs.

The new insurance plans -- with monthly premiums ranging from $51 to $292 per a person -- are on sale now and take effect Wednesday.

On March 27, Blue Cross stopped enrolling new consumers in several older plans, including Value Blue, a catastrophic coverage policy, and its no-deductible Individual Care Blue. The changes don't affect Blue Cross members enrolled in those plans. Instead, the new rates will apply to newly unemployed residents seeking to replace workplace coverage by buying their own insurance from Blue Cross. The new plans also differ from those for which Blue Cross is seeking state permission to raise rates and would not be affected if that request is approved.

With the rollout of these new plans, Blue Cross has introduced a lengthy application that includes optional health questions and ties insurance agents' commissions to the medical condition of new enrollees.

The changes are so drastic that some insurance agents say Blue Cross is deliberately making its money-losing individual policies less attractive to slow sales. Blue Cross contends that it's simply keeping up with market trends, as well as the rates and plan offerings of its private-sector competitors.

As the state's insurer of last resort -- a responsibility tied to its tax-exempt status -- Blue Cross must cover all Michigan residents, regardless of their medical history. But that arrangement, Blue Cross officials say, leaves them with the state's sickest and costliest members. Last year, Blue Cross lost $133.2 million on individual insurance policies, dragging its bottom line to a $144.9 million loss for 2008.

Insurance agents say the new rates will make it harder to sell the plans. New members aren't going to want to pay more in premiums for higher out-of-pocket costs, especially if there are better deals offered by other insurers.

"It's not good for the consumer," said Patrick Pennefather, president of the Michigan Association of Health Underwriters, which represents health insurance agents and buyers for employer groups. The new plans, he added, are going to slow down sales for Blue Cross, a move that could help stem the rising tide of losses on individual policies.

Some agents are likely to stop selling Blue Cross' individual policies altogether because the commission structure lowers incentives for enrolling sickly customers into its individual plans, Pennefather added.

Blue Cross's new incentive structure offers a 15 percent commission to agents who sign up healthy members and only 2 percent for signing new enrollees with severe medical problems. A 2 percent commission could translate into only a couple of dollars a month on some policies, say insurance agents, and is much lower than the 8 percent commissions previously offered by Blue Cross on all policies, regardless of the applicant's health status.

Blue Cross said the tiered commissions better match incentives offered by their rivals in the individual insurance market.

"It may drive a lot of agents out of the individual insurance business. In fact, many have said they plan to get out of it," Pennefather said, noting that agents can make 20 percent with other private insurers.

Some Blue Cross critics, including Michigan Attorney General Mike Cox, have questioned why Blue Cross is collecting health information, since that is at odds with the company's mission as the state's insurer of last resort. Cox's office has said it's investigating whether the changes are lawful.

Answering the questions about health status, however, is voluntary and won't affect consumer eligibility or rates, but will help applicants qualify for lower co-payments, Blue Cross officials said.

Blue Cross also points out that it still pays at least some portion of the commission to agents for all applicants. Most other insurers pay no commission if they end up rejecting the applicant, said Helen Stojic, a Blue Cross spokeswoman.

As for the new plan prices and coverage, Stojic said Blue Cross hopes to better reflect the marketplace, where deductibles and higher out-of-pocket maximums are common.

The insurer also contends its rates are still better than most plans for people with serious medical conditions.

"Our plans are aligned more closely with those in the market, with one important difference: We still don't medically underwrite and we are still the insurer of last resort," Stojic said.

Unlike rate hikes for existing customers, state regulators don't require Blue Cross to seek public input before introducing new plans or closing new enrollment in existing policies.

Blue Cross is seeking rate hikes on its existing individual policies that cover about 400,000 members. It's asking for an average rate hike on three types of policies: a 56 percent increase on individual plans, 42 percent on group conversion coverage (which extends benefits from a former employer) and 31 percent for Medigap plans.

BCBS of Michigan Says It's Losing Money,
Seeks Bailout From Customers
Story from the Detroit News

Robert Boys is 73 years old, lives on a fixed income, and worries he'll soon have to shell out another $33.20 a month on health premiums.

His insurer, Blue Cross Blue Shield of Michigan, is seeking to raise the rates on his Medigap policy by 31 percent, to $140.29 a month, as part of a broader proposal to increase rates on its entire line of individual insurance plans -- policies for people who buy their own medical coverage. Blue Cross says it needs to raise rates to stem growing losses incurred in the individual market.

"They are hitting the people that can least afford it," said Boys, who lives in Brighton. "I'm trying to live on Social Security right now. What do I cut now?"

Boys is not alone in his worries. Many Blue Cross members are troubled by the insurer's proposed rate increases, which are now under review by state insurance regulators. They say the increases are too extreme and ill-timed with the state's unemployment rate in the double-digits -- the highest in decades.

On Monday, state regulators deemed the Blue Cross rate filing complete and will now go about notifying Blue Cross members, as well as other industry stakeholders and the state's attorney general, of the insurer's request. Once those steps are complete, members will have a chance to weigh in by requesting a rate hearing to challenge the increases.

The rate hikes are among the highest proposed by Blue Cross in the last five years and will affect about 400,000 Blue Cross members, including 209,000 seniors who buy their supplemental Medicare plans, known as Medigap.

Depending on the insurance plan, the proposed increases range from a few percentage points to as much as 72 percent for some of the insurer's age-rated plans, such as Individual Care Blue. Blue Cross's Medigap enrollees will see increases of 31 percent, but the hike won't affect Medicare Advantage members.

Blue Cross says the increases are necessary to stanch red ink flowing from its individual health plans and come as part of several cost-cutting moves announced in January by the insurer, including a work force reduction of about 1,000 positions.

As the state's insurer of last resort -- a responsibility tied to its tax-exempt status -- Blue Cross must cover all Michigan residents, regardless of their medical history. But that arrangement, Blue Cross officials say, leaves them with the state's costliest members because those customers are routinely rejected by other private insurers because of pre-existing medical conditions.

"The need for the increases is driven by a broken regulatory system in the individual insurance market that has not changed in nearly 30 years," Blue Cross spokeswoman Helen Stojic said.

Millions in losses claimed

Blue Cross has spent more than a year pushing for legislation changes to give the insurer more leeway in raising monthly rates, an effort that fizzled last December when state lawmakers let the measure die.

Blue Cross now says its losses in the individual market -- expected to increase in 2009 to $210 million -- could jeopardize the organization's long-term financial health.

Some Blue Cross critics, including the Michigan Attorney General Mike Cox, aren't so sure and have questioned the way the insurer is calculating those losses, saying they aren't as large as Blue Cross claims.

Lidia Abate of Farmington Hills is one Blue Cross subscriber eager to voice her opposition.

At age 59, Abate said she pays $286 a month for her Flexible Blue PPO. Her 89-year-old mother also spends another $107.09 a month for her Blue Cross Medigap policy. Under the proposed rate increase, her monthly premiums will rise only 3 percent but her mother's will go up 31 percent to about $140 a month.

"Luckily, she has us lending her a hand with her rent. Can you imagine how many older people will be in trouble if this happens?" said Abate, who lost her job at a physical therapy firm last year. Any increase to her policy will also strain the family's budget, Abate said. "We do have a mortgage and cars and bills and the 401(k) is in the toilet," she added.

Rate increase OK'd in 2008

Blue Cross received state approval last year to raise rates on about 20,000 members enrolled in individual plans, a hike that ranged from 40.6 percent for the high option to 22.49 percent or the moderate-level plans. The final increases approved by the insurance commission were lower than Blue Cross had requested, but still too high for member Ghada Abraham, who challenged the rate hikes before their approval by the insurance commissioner and continues to fight them on appeal.

"Blue Cross was created to make coverage affordable, yet the opposite is happening," said Joseph Aoun, an Ann Arbor attorney representing Abraham, who has the moderate option of Blue Basic and saw her monthly rates increase from $459 to $562 last year. Now, Blue Cross's request could send their premiums up another 63 percent to $917 a month.

"These increases, on top of the large increase they have received in years past, put coverage beyond the reach of the average resident," Aoun said.

Blue Cross said it sympathizes with its individual members, particularly those on fixed incomes or who have lost their jobs.

"Blue Cross wants to continue providing coverage to the vulnerable. But we need a regulatory system that works," Stojic said, adding that the market for individual policies has grown rapidly, saddling the Blues with a greater financial burden than their private-sector competitors.

Blue Cross expects to add another 76,000 individual members in 2009 and its actuaries project losses of up to $1 billion on its individual policies over the next three years. Financial information released in March by Blue Cross shows the insurer lost about $133.2 million on its individual policies in 2008 -- a slight improvement from the previous year's losses of $134 million. Still, Blue Cross says, the losses incurred on individual insurance dragged down the insurer's bottom line last year, contributing to a net loss of $144.9 million for 2008.

BCBS of Michigan to Cut Up to 1000 Jobs
AP Story Posted to MLive.com

LANSING -- Blue Cross Blue Shield of Michigan said Friday it plans to eliminate up to 1,000 jobs and make other budget cuts this year in another blow to the state's economy.

The nonprofit health insurance giant said the moves are necessary to preserve its financial health. Blue Cross had hinted at possible layoffs last year after the Michigan Legislature did not pass changes to insurance rules sought by the company.

The job eliminations could affect more than 10 percent of the Blue Cross system's roughly 9,000 Michigan employees, including its subsidiaries.

Blue Cross Blue Shield employs 250 in its downtown Grand Rapids office.

Blue Cross has said it wants law changes because it is losing millions of dollars each year on health insurance policies that cover individuals.

Blue Cross customers also could feel the brunt of the company's actions. Blue Cross plans to request average rate increases of 55 percent for individual plans, 42 percent for group conversion plans and 32 percent for Medicare supplemental plans.

"We should not ask our individual subscribers to pay more without first demanding sacrifices from ourselves," Blue Cross Blue Shield of Michigan President and CEO Daniel Loepp said in a statement. "Our goal is to move forward as a strong and financially stable nonprofit company, committed to fulfilling our mission and delivering the best value in health insurance products and services to our customers."

Loepp said the company faces losses of $1 billion through 2011.

Blue Cross plans to trim 400 jobs from its core business and its Blue Care Network HMO subsidiary within the next 60 days. The other job cuts would come later in the year.

Some senior executives will face a salary reduction, the company said, while other executive pay will be frozen. Salaries of non-union employees will be frozen, and the United Auto Workers will be asked to delay a 3 percent pay increase planned for the Blue Cross employees it represents.

The company plans to reduce advertising and lobbying by 25 percent. Discretionary spending such as travel also will be cut by 25 percent.

Blue Cross is a nonprofit organization playing a unique role in the state's health care system. It can't deny any customer health insurance as long as the customer pays for it, making it the state's insurer of last resort.

In exchange for a mission of improving access to health care coverage, the nonprofit company is exempt from many state taxes.

The company's annual revenues were about $19 billion in 2007.

Editorial: Blue Cross reform should wait until '09

by The Flint Journal

Sunday December 07, 2008, 6:00 AM

All good things in time. If you believe that adage, then you have to believe good legislation on the issue of individual health insurance will require more time than the Legislature has between now and the end of the year.

Blue Cross Blue Shield of Michigan has been pushing hard for lawmakers to approve changes in the way the state regulates health insurance that people have to buy individually because they don't have coverage through an employer.

That attempt is meeting opposition, particularly from state Attorney General Mike Cox, who says the proposed changes would hurt consumers and give Blue Cross an unfair advantage over its competitors.

The battle between Cox and the Blues has gotten a little nasty. That's unfortunate, because this highly complex issue can be resolved only with measured debate, not with the snide attacks that both sides have launched at times.

That aside, Cox is arguing that the lame-duck session doesn't allow enough time or the right climate of deliberation to deal responsibly with the issue. On that much he is right.

The state House erred when it passed a reform package that some lawmakers later admitted didn't get the consideration it needed. The Senate approved a more-thoughtful package, but differences between the two haven't been reconciled.

Blue Cross now wants action. We understand the insurer's desire for reform. It recently announced that in the first nine months of 2008, it lost $111 million on individual policies.

As the number of people seeking them grows, those losses will only mount.
The attorney general argues that Blue Cross remains financially sound, but the insurer faces long-term losses that would jeopardize its financial health in ways Cox isn't acknowledging.

Under state regulations, Blue Cross receives special tax benefits and in turn has a special responsibility to the public. It deserves reasonable reforms, but the attorney general's oversight should be preserved in a meaningful way.

In November, a compromise proposal became public, but we don't see how lawmakers can responsibly review such a complex plan in a short lame-duck session, nor do we think the issue should be decided by 46 House members who are leaving office and don't have to answer to voters for something rushed too quickly through the legislative process.

This issue is too complex, and there's too much at stake.