22 January 2013

Critics may derail fast track for Blue Cross Blue Shield reform

Article first appeared on The Detroit News

Gov. Rick Snyder wants the Legislature to quickly pass Blue Cross Blue Shield reforms, but some critics are demanding a second look that might delay passage and keep the Blues from offering low-cost insurance under the federal health care act.

The Legislature approved a two-bill package in late December. But Snyder vetoed the legislation earlier this month over anti-abortion provisions added minutes before passage in the lame-duck session. The provisions required women to buy separate, elective abortion coverage.

The bills were reintroduced in the Senate on Wednesday without the added language and are likely to breeze through the Senate. It could be tougher in the House, which has more than two dozen new representatives and has yet to make committee assignments.

"We have 26 new people so we can't do a quick thing like the Senate," said Rep. Pete Lund, R-Shelby Township, who last year chaired the House Insurance Committee. The number of Democrats also has increased in the lower chamber, where the GOP has a smaller 59-51 majority.

House Minority Leader Tim Greimel, D-Auburn Hills, said his caucus' concerns include getting continuation of Medigap subsidies for seniors extended beyond the four years in the bills.

"We're interested in making sure that seniors are protected from any unduly high premiums in their Medigap insurance," Greimel said.

Snyder supported turning the Blues into a taxpaying nonprofit mutual insurance company to streamline the rate approval process and increase competition among insurers. Blue Cross dominates with more than 70 percent of the market. The Blues also support the reforms.

But critics contend the proposal does little to inject more competition and would make it easier for the Blues to raise rates for consumers -- meaning little if any money would be saved.

Among the legislation's biggest critics is Attorney General Bill Schuette, who argues the prior legislation failed to protect consumers. The Legislature ignored Schuette's early calls for an independent valuation of the Blues' assets to determine the nonprofit's worth before entering into a deal.

The legislation requires the Blues to contribute $1.5 billion to an independent foundation to carry on their charitable mission, but Schuette questioned if it is a good deal for taxpayers.

Future of Medigap subsidies:

Schuette also fears that seniors would not have the cost of Medigap, secondary insurance to cover costs not paid by Medicare, subsidized beyond 2016.

"The attorney general negotiated a historic Medigap rate freeze, and this legislation does not address what happens when that expires, (when) thousands of seniors could face rate increases of up to 66 percent," Schuette spokeswoman Joy Yearout said.

Blue Cross spokesman Andrew Hetzel counters the legislation guarantees Michigan's lowest-income seniors will continue to get Medigap subsidies for nearly a decade.

"We believe that the legislation provides extraordinary protection for seniors," Hetzel said. "It guarantees not one penny of rate increase in our Medigap product for four more years, and after that the legislation calls for continued subsidy for Medigap for five more years for the lowest-income seniors."

Schuette and at least one business group also worry that the proposal diminishes the attorney general's role to intervene on behalf of taxpayers. Although Michigan is rated the third least competitive state in the nation for health insurance by the American Medical Association, the Blues would receive no more scrutiny than any other insurer.

"If (the attorney general's) oversight is removed," Yearout said, "seniors would no longer have an advocate to keep these rates down."

Still, the legislation Snyder vetoed had important new rules for the insurance industry, said Rick Murdock, executive director of the Michigan Association of Health Plans that represents non-Blues insurers.

They included a prohibition against an insurer contracting with a health system to give it a lower cost that couldn't be offered to another system, and ensuring the Blues pay their fair share of Medicare and Medicaid costs, he said.

If those provisions are kept in the new bills, Murdock would rather get them approved and worry about other changes later.

Leveling the playing field

Though the Blues package, without the abortion language, had bipartisan support, it was opposed by consumers' groups supported by many Democrats, as well as by some business groups.

"I think we'd like to revisit some of these issues," said Charlie Owens, state director of the National Federation of Independent Businesses.

As the state's insurer of last resort, the Blues for decades promised to insure everyone regardless of pre-existing conditions. In return, they've been forgiven roughly $100 million annually in tax payments. But under the federal Affordable Care Act, all health insurers have to insure such patients, so Snyder proposed it lose its special status.

The Blues agreed and want to compete on a level playing field when consumers start purchasing low-cost health insurance on the Michigan Affordable Health Care Exchange on Jan. 1, 2014. Hetzel said it will take about one year from the time the Blues bills are signed into law to complete the transition to a nonprofit mutual insurance company, so the Legislature would have to act now to ensure the Blues are ready at the starting gate, he said.

Time crunch for approval

The first hurdle comes March 31 when all of the state's insurers who wish to participate in the health care exchange must file a description of their products and prices with the federal government. The products have to be approved by the state insurance commissioner under existing rules. That means some products or prices might not get approval by the end of March.

If the Legislature hasn't passed the Blues legislation, "that puts Blue Cross at the huge disadvantage and it puts the insurance commissioner in a very difficult spot," Hetzel said.

State Insurance Commissioner Kevin Clinton agrees there is cause for concern, especially the lengthy eight- to nine-month process the Blues go through to get rates approved.

"They're going to be under a time crunch unless they can come up with a way to have their rates approved faster than they've done in the past," Clinton said. "Certainly you want your state's largest insurer to be on the exchange."

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