Blue Cross Blue Shield of Michigan, Michigan Attorney General and Michigan Office of Financial and Insurance Regulation near agreement on rate increases on under age 65 individual products
Medicare Supplemental rate request not affected by tentative agreement on rate increases for nongroup and group conversion policies
August 6, 2009
DETROIT - Attorneys from Blue Cross Blue Shield of Michigan (BCBSM), the Michigan Attorney General and the Office of Financial and Insurance Regulation are near an agreement that would conclude the Attorney General's and Office of Financial and Insurance Regulation's challenge over rate increases proposed by BCBSM for its under age 65 nongroup and group conversion products.
Hearings on BCBSM's request to increase rates on its Medicare Supplemental coverage will continue, probably into at least December 2009. The Medicare Supplemental products are not affected by the agreement announced today. BCBSM members covered by employers or groups are not affected by the change.
The tentative agreement with the Attorney General and OFIR would allow BCBSM to raise premiums in individual products designed for purchase by individuals under age 65 by an average of 22 percent. Some products will receive higher-than-average increases, while others will see smaller increases. BCBSM sought to increase rates earlier this year in response to losses of more than $133 million in 2008 on its policies purchased by individuals not covered by employers. State law requires BCBSM product lines to be "self-sustaining over time."
BCBSM's individual product losses are driven by a growing number of people seeking their own coverage and a broken regulatory system that requires BCBSM to cover all individuals rejected by other health insurers for expensive, pre-existing conditions. Another problem with the regulatory system is the amount of time it takes for rates to be determined in BCBSM's uniquely complicated rate-setting process.
A critical factor in BCBSM individual product losses is the higher underlying medical cost that occurs due to cherry-picking by other health care companies operating in the broken regulatory system. BCBSM insures older, less healthy individuals rejected by other health insurance companies. This BCBSM pool of individuals will continue to experience higher-than-average rate increases if the regulatory system isn't fixed to institute the basic insurance mechanism of spreading risk among all insurers to keep costs affordable.
"Because of financial losses and the prospect of a lengthy rate-setting process, we determined new rates were needed sooner rather than later," said Andrew Hetzel, BCBSM vice president for corporate communications. "We sympathize with our individual members — particularly those who live on fixed incomes or who have lost jobs. Blue Cross wants to continue providing affordable coverage. But we need a regulatory system that works."
The best potential relief for Michigan consumers is for the Legislature to complete nearly 22 months of work on modernization of the state's 30-year old individual health insurance system, Blue Cross said. Proposals have been reintroduced in the House and Senate after competing versions failed to be reconciled in conference committee in 2008, and there is a possibility of an agreement on reform this year.
"Even with our new rates, Blue Cross continues to predict losses on individual products. This only means more hardship down the road for our subscribers," Hetzel said. "We need a health insurance system in Michigan that protects people by requiring all insurance companies to cover people regardless of their health condition. We need the Legislature to come together in a bipartisan way and create a fair and balanced insurance market that protects people and keeps health care coverage as reasonably priced as possible, especially for those who need it most."
Blue Cross Blue Shield of Michigan is nonprofit and an independent licensee of the Blue Cross and Blue Shield Association.