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Secretary fails to recognize state's situation
Editor’s note: Michigan Blues President and CEO Daniel J. Loepp sent a letter to U.S. Health & Human Services Secretary Kathleen Sebelius regarding her news conference about insurance company rate increases.
Thank you for your leadership in advancing and advocating for much-needed health care reform in our country. We agree that reform is needed to protect the health of Americans now and into the future. As a nonprofit health insurance carrier, we already operate as Congress and the President's administration would like insurers to behave in a post-reform environment, including accepting everyone and not setting or raising premiums based on health status. We all agree it is important to focus on the facts that will help us meet our shared goal to reform health care.
I was disappointed to see a reference in the report you released today about Blue Cross Blue Shield of Michigan's request last year to raise rates by 56 percent. Without context, the story is not complete. Our regulators granted us a 22 percent increase last year after lengthy negotiations. Despite the granting of this rate increase, BCBSM sustained losses on individual lines of business of $280 million in 2009.
You are already aware of some of the things Michigan is doing very well, having applauded last year the Michigan Health & Hospital Association's Keystone Center, of which BCBSM is a partner and investor, initiatives to improve patient safety for being an excellent example of efficient, high-quality health care in America. There are many more examples of how we've long been working across the health care spectrum to rein in costs, improve quality and expand access.
While there are vibrant examples of how things are being done well here in Michigan, there are also examples of how things can be made better. The current system enables insurers to reject people based on health status and to deny coverage for pre-existing conditions. This creates an unlevel playing field where only one insurer takes everyone.
It's important to understand that BCBSM is different in our approach to health care. I'm proud of our achievements here and can confidently say BCBSM stands as a model for a post-reform health insurance industry. We are the only health insurance company in Michigan that never rejects people for having a pre-existing medical condition. We community-rate our health care coverage for individuals — which means we charge the same premium regardless of health condition. We self-limit our margins — earning just one-10th of 1 percent margin over the last 20 years. We are strongly regulated — we are the only insurer in Michigan that is required to file our rate requests with regulators and then wait for approval from regulators to enact new rates.
BCBSM earns no profit on individual health care coverage. In 2009, we lost $280 million on individual products. Cumulative losses on individual products over the last five years totaled more than $1 billion. In 2009, our medical loss ratio for individual products was 125 percent. For every dollar we collected in premiums, we paid out $1.25 for health care costs. We are the only insurer in the country that provides a $180 million discount to Medicare Supplemental (Medigap) subscribers — guaranteeing losses on this highly regulated product. One hundred percent of BCBSM rate increases on individual products over the past several years went toward paying claims.
Despite our challenges, Michigan rate increases are still lower than most. A September 2009 White House report about health insurance premiums in the individual market found that Michigan had among the lowest rates of premium increases in the nation.
BCBSM continues to support reform that reins in costs, improves quality and expands access to coverage for all Americans. We believe reform should create a level playing field, with consistent rules for all insurers, and expand insurance coverage to the healthy as well as the sick. This is the best way to control long-term increases in insurance rates.
Daniel J. Loepp