Blues Reform Now Or Later

November 22, 2002
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LANSING — Business advocates in Lansing say they’d rather see legislators hold off until 2003 any efforts to reform the health insurance market in Michigan, and in theory producing much-needed rate relief for small businesses, rather than have a proposal rushed through in the waning weeks of the year.

The fear is that any proposal coming before lawmakers during the upcoming lame-duck session will end up as a package that’s not well thought out and does not adequately address the core issues involved.

“It’s a complicated issue. It deserves to have the legislators’ complete attention,” said Nancy McKeague, senior vice president for human resources and the chief lobbyist on the issue for the Michigan Chamber of Commerce.

“We could create more problems in the system than we solve,” McKeague said.

Creating rate relief by reforming the small-group insurance market was among the aims of legislation introduced last May that also sought to reform Blue Cross Blue Shield of Michigan in an attempt to stem the escalating costs of health benefits for employers.

For 2003, the statewide average increase for Blues subscribers is 22 percent for small businesses with less than 100 employees that maintain the existing benefit package. That’s on top of double-digit increases of recent years, including a 15.8 percent rise in 2002.

Market reforms designed to address those increases have stalled because provisions to change the size and composition to the Blues’ 35-member board of directors and to provide the state more regulatory oversight of the Blues have not received the support needed to move.

Blue Cross Blue Shield of Michigan has adamantly opposed any changes in its board and state regulations, and only wants to see reforms in the small-group insurance market to alleviate what’s known as adverse selection. That’s the alleged practice of commercial carriers targeting younger, healthier employee groups, leaving Blue Cross with a pool that’s costlier to insure, which results in large annual premium increases.

Gov. John Engler, who leaves office at the end of the year, is equally adamant that lawmakers need to couple any market reforms with any internal changes at the Blues. He still wants to see a broader reform package considered.

“The governor’s position stands,” state Insurance Commissioner Frank Fitzgerald told the Business Journal last week.

But the governor has found little political backing for his position from legislators, as well as business groups that he has traditionally counted on for support.

“I’m not worried about the size and composition of the Blue Cross board at all,” McKeague said.

But she and her counterparts in Lansing do worry about what may occur in the lame-duck legislative session, especially with Rep. Judy Scranton, R-Brighton and chairwoman of the House Health Insurance Committee formed this year to delve into the issue, preparing to introduce a market reform bill.

Charles Owens, director of the Michigan office of the National Federation of Independent Business, would rather wait until 2003 to take up the issue.

“Let’s start over. It’s a complex issue,” said Owens, whose 23,000-member organization has generally opposed some of the market reforms offered in May, fearing they’re tantamount to price controls.

Owens believes that Blue Cross Blue Shield of Michigan, as the benevolent insurer of last resort in Michigan, must expect some degree of adverse selection.

“They want it both ways. They want all the protections, they want to be the insurer of last resort and they want to pursue their charitable mission,” Owens said. “But then they want to be able to compete on the playing field with other companies.”

With 4.8 million subscribers statewide, the Blues provides health coverage to half of the state’s population, yet lost more than $500 million in the past six years in the small business market.

Even the Small Business Association of Michigan, which has supported the market reform proposals of last May, wants to push any legislation on behalf of the Blues to 2003 and wait until a new governor and Legislature take office.

Taking up an insurance reform bill in a lame-duck session will only provide legislators a measure to attach their own pet projects, said Barry Cargill, SBAM’s vice president for government relations.

“It puts a vehicle out there to light up like a Christmas tree,” Cargill said. “When you put a bill out there (during the lame-duck session), legislators are going to have a field day with it.”

Even if market reform gets pushed into next year, as many believe it will, debate over the issue that’s occurred throughout 2002 isn’t for naught, Fitzgerald said.

“An excellent foundation has been laid. There is certainly a higher level of understanding among legislators,” said Fitzgerald, a former state lawmaker whose term as commissioner of the Office of Insurance and Financial Services runs through March 2004. “Any focus we put forward this year is not going to be wasted effort.”

Of incoming governor Jennifer Granholm and the prospects for a reform proposal under a new administration, Fitzgerald simply said: “We could work together very nicely.”           

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