Blues 3Q average rate hike is 7 percent for small firms
Blue Cross Blue Shield of Michigan has announced a statewide average increase of 7 percent for the third quarter of 2012, with its press release ascribing “this moderate trend in premium growth to efforts to bring more cost-effective products to market, promote wellness, and partner with physicians and hospitals statewide to improve health care quality.”
The Blues’ statewide average increase for small employers is significantly lower than its average increases of about 12 percent for the same period in 2011 and 2010.
“It’s always good to tell your customers that you’re dealing successfully with their top priority,” said Kenneth Dallafior, BCBSM senior vice president for group business and corporate marketing. “Blue Cross’s work with doctors and hospitals to improve quality, control costs and help people live healthier lives is paying off for Michigan employers.”
Scott Lyon, vice president of small business services at the Small Business Association of Michigan, said health insurance costs vary from region to region, and from one company to another, depending on the company’s demographic. However, in general, it’s all been going up.
“Rate increases for health insurance are a fact of life that, unfortunately, everyone deals with. I don’t know that I have ever seen a rate decrease,” he said.
Lyon’s perspective on small group health insurance cost goes back to 1984, he said.
“Over those years, I’ve seen many years with rate increases in double digits. I can remember some years upwards of 20 percent or more,” he said.
“Given that perspective and all that’s out there right now with the Affordable Care Act, Blue Cross is doing an admirable job of keeping rates in the single digits,” he said.
While adding that 7 percent is still at least double the rate of inflation, he said that, in terms of health insurance cost increases, it is “still a pretty good number in today’s world.”
The Obama Administration’s Patient Protection and Affordable Care Act is pushing up insurance rates a little bit, he said, but added there are “some huge cost drivers out there that have nothing to do with the Affordable Care Act.”
The first he mentioned are the expensive new technologies in use by medical professionals. Other factors include the general aging of the baby boomer population, the high cost of specialty drugs, “and a big piece of it is cost shifting” in which the federal government is picking up less of the cost of Medicare and Medicaid.
“There’s a new Michigan claims tax adding a little to rates,” said Lyon. That was signed into law last September by Gov. Rick Snyder and took effect Jan. 1 and puts a new 1 percent tax on paid health care claims. It is paid by insurers providing full coverage and by third-party claims administrators in the case of self-funded plans. The tax will be paid quarterly, starting April 30. Medicare Advantage plans, Medicare prescription drug plans and federal employee plans are exempt, as are services provided to non-Michigan residents. It is designed to generate $400 million annually to help fund the state’s Medicaid program.
New annual fees levied on pharmaceutical manufacturers by the federal government kicked in this year, according to Lyon, which “will put pressure on their prices.”
The Affordable Care Act already has added some pressure to insurance rates, mainly the requirement that children up to age 26 can be covered by their parents’ family plan. There are also preventive services for children and women that now must be covered.
Lyon said SBAM is not a fan of the Affordable Care Act.
“I think it is an opportunity missed, because the reform that was passed, I think, is upside down. It did very little to get at the problem, which is cost. In Michigan, our members — the small business community — don’t have an access problem. They have a cost problem, and the Affordable Care Act didn’t fix the cost problem. In fact, it probably made it worse.”
He said SBAM has spoken up in Washington for years on proposals to cut the pressure of health care costs for small business, and the shift from federal payment for Medicare and Medicaid are high on the list.
“Really getting at waste, fraud and abuse is another one,” he said. “Some estimate that as much as a third of what the U.S. spends on health care is wasted.”
He added that what is needed is “continued reform of the medical malpractice system,” plus more movement toward common standards for electronic medical records so that information can be shared, and “getting a true comparison of health care costs and success rates.”
“Getting a picture of what’s really going on — who’s good at what — is what I’m getting at,” he said, noting that data should be available on what a given procedure costs at each hospital and what the success rates are.
“If you could get at that, and really do a good comparison on what’s going on inside of hospitals, and start picking the hospital that does the best job for the best cost — that would be very helpful, I think,” he said, because those best practices could be a reference point.
Lyon received an information packet from BCBSM that lists its rate increases since 2005. That year saw a 6.9 percent overall statewide average increase; in 2006, it was 6.5 percent, and 9 percent in 2007, 9.6 percent in 2008, 8.8 percent in 2009, 12.1 percent in 2010, and 12.5 percent in 2011.
According to BSBSM, during 2011 the organization experienced membership growth for the first time since 2008, with a membership gain of 61,846 driven by new business growth and higher retention of existing business. Total combined membership for BCBSM and its HMO subsidiary, Blue Care Network, grew to 4,414,620 Michigan members in 2011.
BCBSM says it has made “significant efforts to bring more affordable health plan options to market and promote better health for members. The Blues also launched the nation’s largest Patient-Centered Medical Home program and now have more than 45 active initiatives with physician organizations and hospitals that are improving the quality of health care and lowering its cost.”
John Dunn, BCBSM vice president for middle and small group business, said Blue Cross has “made a concerted effort to bring significantly more affordable and flexible products to the market. We now have more choices for employers, including Simply Blue, which is our most successful new product in three decades.”
Simply Blue PPO, launched in 2011, has more than 134,000 people enrolled. Almost 15 percent of the employers that offer it are new customers for BCBSM.
“Simply Blue and its partner — Healthy Blue Living — are giving Blue Cross and Blue Care Network the ability to deliver choice and flexibility to employers that are searching for lower premiums and wellness incentives as ways to address their cost concerns,” Dunn said.
In Simply Blue, employers can choose from several deductible and copayment options that can be paired with a health reimbursement arrangement or health savings account. The product is priced from 5 percent to 15 percent below other Blue Cross PPO plans.
The Blue Care Network HMO also announced statewide average rate increases of below 7 percent for its small group customers, and had record-breaking membership in 2011 of 696,244 members overall — an increase of more than 46,000 members.