Health Alliance Plan late last week joined the growing slate of companies and organizations lining up to oppose state legislation backed by Blue Cross Blue Shield of Michigan.
HAP is taking issue with House Bills 5282 and 5283, which would set new rules in the growing market for individual health insurance.
In talking points forwarded to Crain's,HAP said any initiative to reform the individual market should be based on three objectives:
- Reducing the number of uninsured in Michigan.
- Making health care coverage less costly and more affordable.
- Promoting competition in the individual market.
The Blues' legislation falls short on all three objectives, HAP said.
The legislation "was crafted by a single carrier, perhaps disguised as a solution for the issue of uninsured and the cost of individual health care in our market," said Jon Clement, vice president of finance at HAP.
"But after simple analysis, it's more a solution for the Blues," he said.
HAP's concerns follow others raised last week by Michigan Attorney General Michael Cox, AARP Michigan, health advocacy nonprofit Consumers Union, the United Auto Workers, Aetna and other commercial insurers and the Michigan Osteopathic Association.
The Blues say competitors are insuring primarily healthy individuals, leaving the Blues, which must insure anyone who seeks coverage, to hemorrhage money on the sickest customers. Others say the bills are written to protect the interests of a single insurer — the Blues — and that consumers ultimately will have fewer choices if the bills become law.
Cox contends the bills cripple the state's ability to regulate the Blues' rates.
"There's a lot of rhetoric out there," said Helen Stojic, public relations director at Blue Cross. "We'll be glad to sit down and talk to people and help them understand why this legislation is good for the individual marketplace," she said.
"Blue Cross is incurring massive losses, and the regulation is lax for the rest of the market. This legislation would impose the same sort of regulations on all carriers" while maintaining the Blues' status as an insurer of last resort, she said.
The Blues' individual insurance bills and two others, HB 5284 and HB 5285, passed the House in October.
They also include a proposal that the Blue's for-profit subsidiary, the Accident Fund Insurance Co. of America, be allowed to begin selling other types of insurance beyond workers compensation.
The Blue Cross legislation is before the Senate Health Policy Committee, where chairman Tom George, R-Kalamazoo, says it will get a thorough look.
The committee plans to hold a hearing Wednesday to receive an overview of the individual health insurance market, but George said the committee will not take up the specifics of the bills until January.
He said he expects to hold several hearings, as opposed to the one hearing the bills received in the House.
George said he is aware of concerns raised by competitors, the attorney general and others, and said he is "interested in hearing about all of those concerns," as well as the Blue Cross arguments for the bills.
"As a legislator, my interest is finding what is going to work to promote the health of the people of Michigan. I'm at the point where I'm going to be approaching this with an attitude where I want to hear all the arguments," George said.
Matt Marsden, press secretary for Senate Majority Leader Mike Bishop, R-Rochester, said Bishop wants to "make sure that we do our due diligence in examining every aspect of the proposed legislation, and then we'll move forward from there."
One of HAP's largest concerns is that the proposed legislation would make organizations such as HAP — which, like the Blues, offers community-rated medical coverage to individuals without health screening and without regard to age — share in the potential losses Blue Cross would realize in its offering of individual products, Clement said.
The legislation, according to an analysis circulated by Blue Cross in Lansing, calls for the creation of a Blue Cross-administered Guaranteed Access Plan that would be funded by assessments levied on insurers. Blue Cross would pay for startup costs and absorb losses through the first two years.
Thirty-four other states operate these types of high-risk plans, and 29 of them have some sort of assessment to help fund the pool, such as a tobacco tax or an assessment on all carriers in the state, Stojic said.
As an HMO, HAP has offered coverage to individuals since its inception, Clement said. "We don't like the idea of being forced to underwrite someone else's losses when we're essentially in the same position."
The insurance industry as a whole should make recommendations on improvements in the individual health market, he said. "We feel strongly that some of those improvements might include ... that every carrier offers the same benefits," Clement said.
HAP takes issue with a number of other points in the proposed legislation, including a proposal to define the acceptable loss ratio for individual health plans, other than the Guaranteed Access Plan, as 70 percent, meaning that 70 cents out of every dollar would get spent on claims.
"Our target loss ratio on these products is more in the neighborhood of 92 percent," Clement said. The proposed 70 percent loss ratio "(would give) the Blues the opportunity to have triple the administrative costs."
The Blues proposed a 70 percent loss ratio because it was the highest mandated ratio in other states, Stojic said.
The Blues currently spends $1.27 for every dollar it takes in, or a 127 percent loss ratio, she said.
"The reason we were interested in loss ratios is currently the for-profit insurers have a 55 percent minimum loss ratio in the state," Stojic said.
The new ratio would mean some carriers operating at low-end loss ratios would have to pay more in claims to meet the 70 percent mandate, she said.
"We want to have a level playing field for all the carriers when it comes to regulation. One way to do that is to have a loss ratio that's mandated in this law," Stojic said.
The legislation also would expand the number of people eligible to buy an individual policy. Employed individuals who now pay more than 50 percent of their premium through group coverage would be able to shop around for an individual plan.
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