02 November 2010

Opinion: Legislature should revisit State Insurance Law

Lansing State Journal

Blue Cross Blue Shield of Michigan now faces the Justice Department in federal court over its pricing tactics. But this conflict should have the full attention of the next Michigan Legislature, too.

To that body's members comes this question: Based on the information coming to light about the Blues, are the people of Michigan still served by Public Act 350 of 1980 and Blue Cross' operation under it?

A privatized Blue Cross competing for customers and business just like other health insurers - and free of the dictates of PA 350 - has long been an appealing goal. The accusations made by the federal government - and they are only accusations at this point - provide more motivation to reconsider PA 350.

In the antitrust lawsuit, federal attorneys state, "Blue Cross' use of MFNs (special provisions) has reduced competition in the sale of health insurance in markets throughout Michigan by inhibiting hospitals from negotiating competitive contracts with Blue Cross' competitors."

The Blues can do this because of the firm's huge market share - 60 percent statewide and 70 percent in Greater Lansing, the feds say. (Blue Cross says the figures are lower.)

Mid-Michigan may recall a bitter dispute between Sparrow Hospital and the Blues a few years back. The federal lawsuit, joined by Attorney General Mike Cox's office, states, "Sparrow Hospital, the largest hospital in Lansing, where Blue Cross' contract requires the hospital to charge some of Blue Cross' significant competitors at least 12.5 percent more than the hospital charges Blue Cross."

Blue Cross' defense, so far, has been to argue that it has special responsibilities under PA 350 and its deals save its customers billions of dollars.

But anti-competitive practices, if they are proven, are not good for the insurance industry or Michigan. As the federal lawsuit puts it, "By reducing competition in this manner, the MFNs are likely raising prices for health insurance in Michigan."

Blue Cross has long complained that the intersection of PA 350 and state insurance law has put it in an impossible financial position. The insurer has argued that its responsibilities have led to huge losses — losses that far exceed the value of the state tax breaks it receives under PA 350.

The courts will decide if the Justice Department is right. But only the Legislature can decide to rewrite state law to reflect the realities of 21st century health care.

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