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Blue Cross Blue Shield of Michigan Says Guaranteed Access Provisions of Insurance Reform Bills Protect Michigan Consumers Twice-Over
Creating 'high risk pool' while preserving Blue Cross's nonprofit mission gives Michigan consumers most secure insurance market in the nation
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LANSING, January 30, 2008 - Creation of a Guaranteed Access Plan to provide insurance coverage to people rejected by commercial insurers and HMOs because of pre-existing medical conditions was the focus of testimony before the Michigan Senate Health Policy Committee today. The Senate is considering a package of House-passed legislation to reform Michigan's individual health insurance market to protect consumers.
Primarily financed by Blue Cross Blue Shield of Michigan, the Guaranteed Access Plan (a so-called "high risk pool") would complement Blue Cross's ongoing responsibilities to accept everyone who applies for coverage to give Michigan consumers the most security possible as tens of thousands more individuals seek health insurance outside of employer groups every year.
"This legislation provides Michigan consumers with a double layer of security," said Andrew Hetzel, BCBSM vice president, corporate communications. "The bills preserve Blue Cross's historic nonprofit role, accepting everyone who applies for coverage, and providing millions of dollars beyond our tax benefits to keep health care affordable and promote access. At the same time, they create a means of obtaining coverage for people who are rejected by commercial insurance companies and stabilize the entire marketplace by spreading the responsibility for excess medical cost across all insurers.
"This is really the best of both worlds for Michigan consumers," Hetzel said.
A review of insurance nationally shows that 34 other states have adopted high risk pools to help cover individuals with serious medical conditions. In 29 states, high risk pools are subsidized by a financial assessment on all insurance carriers operating in the individual health insurance market. Many of these same carriers oppose Michigan creating a similar system of shared responsibility.
"Creating the Guaranteed Access Plan, preserving Blue Cross's mission, putting reforms in place to protect consumers from rate hikes and providing refunds for people if the insurance commissioner finds they have been overcharged, combine to give Michigan consumers one of the most secure insurance systems in the nation," Hetzel said.
The legislation preserves Blue Cross's current nonprofit mission to cover everyone who applies and contribute to affordable health care in the state — but enhances that role by making BCBSM responsible for administering the GAP and paying the lion's share of the cost:
- BCBSM would pay all of the costs associated with the GAP for the first two years.
- After two years, BCBSM would continue to pay all the administrative costs of the GAP in perpetuity. These costs typically total about 10 percent of the cost of claims.
- After two years, BCBSM would pay out all of the premiums collected by the GAP to cover GAP member claims, plus an additional 5 percent above premiums collected. For GAP losses above 105 percent of premiums collected, the state insurance commissioner would determine whether an assessment of the insurance carriers in the individual market was needed.
- After two years, BCBSM would pay its share of any industry-wide carrier assessment. The assessment would be applied to each insurer based on their market share.
Blues Mission Preserved — Returning Multiples of Tax-Free Benefit to Michigan
In addition to creating the new Guaranteed Access Plan, the bills also preserve Blue Cross's role under Public Act 350 of 1980 to contribute to affordable, accessible health care for the people of Michigan. The Blues released a report today, based on an independent examination of the company's financial obligations under PA 350, that confirms that BCBSM pays back nearly five times the value of its state and local tax exemption — at least $391 million in 2007 social mission spending compared to $80 million in tax breaks as a nonprofit corporation.
"Blue Cross's mission and our financial obligations go far beyond insurer of last resort," Hetzel said. "Michigan can create a guaranteed access system to stabilize the market, while still having the benefits of Blue Cross as the insurance safety net, accepting everyone and paying millions to promote affordable coverage for seniors, children and families in transition from employer plans. We really have an opportunity, through this reform, to provide real health security for Michigan consumers."
Blue Cross Blue Shield of Michigan is a nonprofit corporation and independent licensee of the Blue Cross and Blue Shield Association.
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