LANSING – Long-time Blue Cross Blue Shield of Michigan critic the Michigan Association of Health Plans on Thursday issued its most detailed critique to date of the legislation that would transition Blue Cross to a nonprofit mutual company with a slew of recommendations for the Senate Insurance Committee, which held its first official hearing on the legislation.
The criticism at the hearing came not long after a top Blue Cross official laid out an equally detailed case in favor of the legislation. The Blues have said it would enable them to adjust rates much more quickly to the market, move toward treating the Blues like all other insurance companies as the Blues will soon no longer be the only insurer of last resort and make available $1.5 billion over 18 years toward improving health in Michigan.
Despite the laundry list of flaws the Health Plans cited, the group stated its official position on the bills (SB 1293 and SB 1294 ) as “neutral” because it applauds the effort to “create a level playing field” for all health insurance companies across the state, according to Executive Director Rick Murdock, but without numerous provisions the legislation merely makes the conversion official, he said. Committee members seemed surprised at the neutral position given the litany of criticism the association levied.
“There clearly must be a transition period to reach that objective,” Murdock told members of the committee. “(But) simply and abruptly converting Blue Cross Blue Shield to a nonprofit mutual without adopting any other changes that affect the competitive environment maintains the current monopoly status as we see it.
SB 1293 amends the Insurance Code and discusses rate factors, including an added factor of smoking, as well as instructs the Blues to give those insured 180 days’ notice before discontinuing a product, and 90 days to the insurance commissioner. There is also “strong prohibitive language,” Sen. Joe Hune (R-Hamburg Township), sponsor of the bill, forbidding the Blues to become something other than a mutualized nonprofit company. The only shortfall of the bill, Hune noted, regarded oversight of the $1.5 billion contribution the Blues must make to a new, nonprofit organization, though he expects a final version will include that language.
SB 1294 amends Public Act 350, the law that currently governs the Blues’ operations. It allows for Blue Cross Blue Shield’s board to vote on become a mutual nonprofit company and mandates that only with such approval will the conversion take place. Like the other bill, it also addressed rating factors, as well as expediting the rate process.
But Murdock was not satisfied with the contents overall, saying that because Blue Cross owns about 70 percent of the commercial market in the state, it is a monopoly “by any definition.” He also attributed the state’s fourth-worst ranking in the nation as a competitive state for health insurance companies to this fact.
“We hope that the proposed reform of Blue Cross Blue Shield will take place under the shared objective of Michigan striving to become the most competitive marketplace in the nation, which means, by definition, no company be permitted to occupy the monopoly position,” he said.
Such language “providing protection for Michigan citizens regarding a definition of a monopoly and the appropriate, we believe, additional oversight necessary whenever a company exceeds the threshold of this definition on a statewide basis,” Murdock said, was among the numerous changes he said the association would need to see in the legislation in order to fully support it.
Though the provisions he listed were aimed largely at Blue Cross’ entering into the world of a nonprofit mutual company, Murdock said the monopoly provision, as well as others, should be wider changes made to the amended Insurance Code bill.
Those changes included: language on “most favored nation” clauses applicable to all carriers (including Blue Cross), as well as language regarding the need for all carriers to pay their fair share of uncompensated care caused by Medicare and Medicaid. Language that would specify the payouts of the state and clarify that the proposed nonprofit organization that will be the recipient of the $1.5 billion “would be at an arm’s length from Blue Cross and its subsidiaries,” was also a suggestion, Murdock said.
Finally, there should also be language that would provide protection and full recovery of assets to the state of Michigan in the event of the sale of Blue Cross Blue Shield to a for-profit company or conversion of a for-profit mutual, as well as language that addresses the misalignment of sections of the Insurance Code with the affordable care requirements.
As for SB 1293, Hune, chair of the committee, said Public Act 350 should stay in place until the board of directors over at Blue Cross actually acts on the conversion, and Murdock was supportive of such action.
“I don’t think we can abolish PA 350 and certainly, if that does happen, an act of the Legislature can address that,” Hune said.
Murdock said some provisions of the law made sense and that if the PA 350 were to ever see a full repeal, some provisions of the law should be moved over to the Insurance Code.
Specifically, he said, those provisions were: “One, that premium rates must be not inaccurate, which we believe protects against predatory pricing; two, the products cannot be packaged with subsidiary products, three, continued oversight of the attorney general, four, that Blue Cross will have paid its fair share of hospital requirements … five, issues on caps on surplus; and six limitations on investment and acquisitions.
“The fact that these provisions are unique to Blue Cross Blue Shield does not mean that they are at a competitive disadvantage when there ought to be consistent regulations on all licensed entities at this time,” Murdock said.
But at this point, the Health Plans seem to be the lone major critic of the legislation. Other potential foes have said they wanted to review the legislation, which was only officially introduced Tuesday.
The governor’s office, Detroit Regional Chamber, Michigan Business and Professional Association, Michigan Municipal League, Small Business Association of Michigan, and of course, Blue Cross Blue Shield, were among supporters of the legislation, many of whom took their turn expressing such support to the Senate panel.
“We do support the governor’s plan to modernize the Blues. We do an annual health care survey to our 20,000 members throughout the state and 83 percent said health care for their employees was critical to their business operations,” said Jennifer Kluge, president and CEO of the Michigan Business and Professional Association. “Sixty-one percent paid for all or most of the cost of covering for their employees, so this is an important issue for small business.”
Others had more concerns, particularly as related to Medigap funding, which helps seniors pay for costs not covered by Medicare.
But Mark Cook, vice president of governmental affairs for Blue Cross, assured that seniors would be taken care of. For starters, he said, a current rate freeze exists for the program that is set to last for another four years. Secondly, more options for such a plan exist now than did back in 1980 when Medigap portions were put into place.
“Medicare advantage plans became available beginning in 2003 and now are quite prolific in that there are a dozen plus plans that are out there in Michigan. And Medicare advantage, of course, takes that traditional part b coverage and adds in drug coverage and gap coverage and kind of rolls it all together and has, in many cases, more robust coverage,” Cook said, noting things like nurse help lines that have been added into Medicare advantage plans. “And those combined are priced very competitively to even our subsid
