LANSING – As bills that would convert Blue Cross Blue Shield of Michigan to a mutual company continue their movement in the Legislature, the question that keeps coming up at every committee hearing is: What happens to Medigap coverage after the attorney general’s rate freeze ends in July 2016.
One of the biggest wins for senior advocates last term in the legislation that was vetoed by Governor Rick Snyder was the addition of a five-year subsidy beginning August 1, 2016 and going through December 31, 2021 to help offset potential fluctuation seniors may (or may not) see when paying for Medigap – a supplemental policy that tries to cover health-related costs not covered by Medicare.
That subsidy is to the tune of $120 million over five years, an average of $24 million a year for the hundreds of thousands of seniors in the state who use Medigap. But senior advocates such as the AARP and Area Agencies on Aging, as well as Attorney General Bill Schuette, have been less than pleased with the tradeoff.
In fact, when similar legislation moved through the Legislature last term, Mr. Schuette opposed the bills after they left the House, saying the bills as written did not provide enough protection for seniors.
Schuette still does not support the bills in the form that passed the Senate last week, spokesperson Joy Yearout said in a phone interview Friday.
“They lack the protections necessary to ensure seniors don’t face skyrocketing Medigap costs,” she said. “We will be working with the House to hopefully add more (protections).”
Yearout said the current Medigap subsidy in place provides about $180 million to seniors on Medigap.
Blue Cross Blue Shield of Michigan has maintained throughout this process that there are currently, and will continue to be, numerous other outlets for seniors to acquire Medigap coverage.
“While we understand the conversation on this particular issue is focused on Medigap, what we would encourage legislators to do is to focus on the broader options available today for seniors that provide comparable or even better prices than Medigap,” said Andy Hetzel, vice president of corporate affairs for Blue Cross Blue Shield of Michigan.
“Between the number of options that are available and the fact that the Legislature has provided extraordinary protections for virtually the next decade, we believe seniors can rest assured they will remain protected from rate increases that will affect their pocketbooks,” he said.
But Mary Ablan, executive director of the Area Agencies on Aging Association of Michigan, said none compare to Blue Cross’ Legacy plan, which currently covers about 200,000 seniors in the state.
In a comparison of numbers taken from the Blue Cross website and a federal website on Medicare, Ablan said a person with a Legacy Plan C would pay a higher premium but have no annual deductible and pay nothing for primary doctor visits, specialist visits, emergency care, ambulance, home health care and other potential costs. Meanwhile, a person with a Blue Cross Blue Shield of Michigan Medicare Advantage Plan would have a lower premium but also a $500 annual deductible and some costs associated with the aforementioned services.
“I think the whole philosophy of this legislation is that Blue Cross wants to level the playing field and function like insurance companies,” she said. “Right now they are the insurer of last resort for seniors and people with disabilities, and other insurance companies don’t have to do that.”
Ablan said there was “no question in my mind” that the Blues would eliminate the “heavily regulated policies” such as Legacy as soon as they could, but Hetzel said it was “very soon to speculate on something like that.”
Asked of the affordability for seniors, Hetzel said “of course” no other plans compared to Legacy given the estimated $200 million cost of the current subsidy put against all those who pay for it.
Currently, PA 350 enables the insurance commissioner to put a 1 percent assessment on revenue on Blue Cross. The regulator requires that the Blues lower the price of their Medigap plan by an equivalent amount, which it attempts to collect from customers, Hetzel said.
And customers such as large, self-insured companies can claim an exemption on Medigap.
“We will charge them for administrative service fees, we’ll process their claims for them and manage the money used by those companies to pay for insurance,” he said. “Many claim an exemption from Medigap, so when we attempt to collect back the amount we subsidize, the pressure predominately falls on small-to-medium sized businesses.”
And those representing such companies, such as the Small Business Association of Michigan, have long been overwhelmingly supportive of the Blue Cross overhaul given how much their companies have had to pay in premiums. Repeatedly, SBAM has said that its members continue to say that being able to provide health insurance at an affordable rate has been an ongoing issue for their respective businesses.
“We collect back the subsidy from those companies in the form of higher insurance costs,” Hetzel said, adding that while they collect back a percentage of the overall subsidy from employers, whatever remains is paid for through the Blues themselves.
And so the struggle heads to the House, where parties on both sides will no doubt be making their best case for or against the legislation and it will ultimately be up to representatives to decide what to do with it.
“Blue Cross Medigap Legacy policies are the most accessible and most affordable policies available in Michigan today. It is essential that these policies be preserved for low-income seniors and people with disabilities with health problems,” Ablan said. “The policies are an essential safety net. Without them, more Medicare beneficiaries will be forced to drop supplemental insurance and go on bare Medicare, which covers less than half of total health care expenses.”
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