BCBS Hikes Rates in State

Health CMI

 

Blue Cross Blue Shield of Michigan (BCBSM) has asked permission for a rate hike of up to 15% for nearly 200,000 individual subscribers. Hikes for group subscribers will range from 8-12%. The premium increase must be approved by the Michigan Office of Financial and Insurance Regulation for it to take effect. BCBSM claims that they will lose over $50 million dollars without the hike.

This may come as a surprise to many policy holders since Michigan’s insurance commissioner approved a 22% increase last year for both individual and group policy holders. Despite the increase, BCBSM claims to have lost nearly $100 million last year. Michigan Attorney General Mike Cox has questioned the loss claims since BCBSM increased its surplus by $528 million in 2009. That is profit on top of the already $2 billion surplus that the company holds. Cox has also questioned the purported losses because the State of Michigan gives the company $100 million in tax breaks every year to help control costs and prevent losses.

Last year, Attorney General Cox asked Blue Cross Blue Shield of Michigan pointed questions about their finances. In a letter to BCBSM, Cox asked about bonuses and  salaries to board members, perks such as entertainment expenses, and the total value of the BCBSM art collection. Cox also asked for BCBSM to state the amount of funds transferred to affiliated companies. The Attorney General estimated the transfer of funds out of BCBSM to be over $450 million since 2005. Such a transfer would then show up as a loss for the company even though the funds are received by affiliates. This line of inquiry shows that the Michigan Attorney General suspects clever accounting techniques and financial manipulation to help show a loss for BCBSM.

At the same time, Michigan Congressmen John D. Dingell and Sander Levin questioned Blue Cross Blue Shield of Michigan President and CEO Daniel J. Loepp about proposed rate hikes. The Congressmen asked questions concerning how much of the rate hikes will go towards paying benefits to subscribers, why the BCBSM massive surplus is not used to offset any losses, and what types of bonuses did employees making more than $500,000 per year receive. This line of inquiring was partially triggered by BCBSM paying enormous bonuses to executives  prior to announcing a reduction of its workforce, salary freezes, and rate hikes. Blue Cross Blue Shield of Michigan CEO Leopp had a 23% increase in salary in 2009 to $1.12 million. However, his bonus pay has now dropped to approximately $650,000 down from last year’s $888,269.