4 things to know about the changes to Blue Cross Blue Shield of Michigan

Mar 18, 2013

Today, things change for Blue Cross Blue Shield of Michigan.

After Governor Rick Snyder signed the law this afternoon, the state's largest health insurer will no longer be a 'benevolent trust' owned by the people of Michigan.

Instead, it will transition into a customer-owned, nonprofit, mutual insurance company.

As such, Blue Cross Blue Shield of Michigan will be able to operate without as much state oversight.

Reading about changes to an insurance company might be enough to make you click away. Perhaps there's a funny cat video online. (If you must, I recommend this one.)

But if you're still with me, read on for the four things to know about the changes to Blue Cross Blue Shield of Michigan.

1. Blue Cross Blue Shield of Michigan is now like any other insurance company

It used to be owned by you and I, the people of Michigan.

The company got its start in 1939 when state law formed the charitable insurance provider.

It has been 'the insurance company of last resort.' It was required to insure patients other for-profit insurance companies wouldn't take.

You couldn't be denied coverage because of age or pre-existing conditions, but the Affordable Care Act has changed things.

Under the new federal law, no insurance company can deny you coverage, so Blue Cross argued the old state rules should not apply.

2. Blue Cross lobbied for these changes

Since the rules have changed, Blue Cross Blue Shield of Michigan argued they were at a disadvantage. The company went to Governor Snyder and the state Legislature asking for changes.

The company said it was burdened with too much state regulation. The state used to oversee any rate changes the company wanted to make. The Attorney General or the state's 'Office of Financial and Insurance Regulation' could scrutinize the changes.

Here's an example of how the state once stopped a rate increase:

When Blue Cross requested a 36 percent rate increase for Medigap policies in 2009, Attorney General Bill Schuette challenged this request. The result? The state approved a 4 percent rate increase instead.

Now that all companies will have to compete on newly created 'health care exchanges' established by the Affordable Care Act, Blue Cross argued this kind of state oversight put them at a disadvantage.

Bridge Magazine's Peter Luke described it to us this way:

“Blue Cross argued that under the Affordable Care Act, they require consistent regulation with other insurers at the state level to participate in exchanges that will be set up.... They said the regulatory framework for putting those policies onto the exchange was too cumbersome."

Starting this October, you will be able to shop for insurance coverage on these exchanges.

Blue Cross has until March 31 to submit their product descriptions and prices to the federal government. They can submit their products and prices now without state oversight.

3. The bottom the line for you and your insurance rates

Chances are, you carry insurance with Blue Cross Blue Shield of Michigan. There are 4.4 million Michigan members under Blue Cross Blue Shield of Michigan coverage - 70 percent of the market. In some cases, as Peter Luke told us, they have 100 percent of the market.

It's huge, and many critics argue deregulating a company that has so much market share is not good for business.

Blue Cross Blue Shield of Michigan will be able to make rate changes like any other insurance company now.

There will be less state oversight.

"Any time you deregulate a monopoly, the tendency is that the monopoly will enjoy that regulatory freedom. In what way they'll do that is unclear," said Peter Luke of Bridge Magazine.

"Any time you deregulate a monopoly, the tendency is that the monopoly will enjoy that regulatory freedom. In what way they'll do that is unclear." - Peter Luke, Bridge Magazine.

Blue Cross says your rates won't be directly affected.

Without state oversight, they say they'll be more innovative and competitive. From Bridge Magazine:

Spokesman Andrew Hetzel said the conversion will not directly affect rates of Blue Cross customers.

“Rates are predominantly affected by health-care cost growth,” he said. “Indirectly, rate increases in the market should moderate because this reform levels the playing field, improving competition among all carriers.”

So Blue Cross is cleared of more state regulation, but federal regulation could get in the way of rate increases.

The federal Affordable Care Act's 80/20 rule requires that insurance companies spend at least 80 percent of its premium dollars on medical care.

4. Some seniors could be paying more

Some seniors and the baby boomers who are entering the Medicare world are worried about higher costs.

Michigan Radio's Kate Wells did a piece on their worries last year:

...some seniors say it could make their healthcare bills skyrocket, or even take away some of their health insurance plans all together.

Medicare is generally thought of as good medical coverage, but it doesn't cover every health insurance need.

That's where Medigap comes in.

And Blue Cross has been providing that coverage to seniors in Michigan at a subsidized rate.

With the new law signed today, Medigap coverage will expire in 2016.

Some experts say many seniors will just go without medical care once that coverage is dropped. From Bridge:

In testimony at the Capitol recently, Mary Ablan, executive director of the Area Agencies on Aging Association of Michigan, warned, “”Seniors living on the financial edge will be forced to drop their Medigap coverage and rely on bare Medicare with its large out-of-pocket costs. Research shows that seniors without sufficient income will forego medical care and prescription drugs that they desperately need.”

Blue Cross says seniors will be able to buy expanded coverage through their Medicare Advantage program. But since that program is not subsidized the way Medigap is, expenses are higher.