Legislator Gloomy About Reform

July 3, 2003
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LANSING — Stephen Ehardt hopes he’s wrong, but he believes the governor is about to sign small business health insurance reform bills that will hit some consumers and businesses hard starting next year.

Ehardt, a Lexington pharmacist, is a GOP member of the Michigan House of Representatives Health Committee.

He said the committee has spent months negotiating with its Michigan Senate counterpart over differences between the two chambers’ bills to reform health insurance for small companies.

He said outstate media have given almost no coverage to the reform because “it’s too complicated for a 30-second sound-bite.”

Basically, he said, the Michigan legislature set out early this year to give Blue Cross/Blue Shield some badly-needed rate-setting flexibility for small-business groups.

He said the legislature also wanted to curb the practice of “cherry picking,” whereby commercial carriers were covering low-risk business groups and leaving the high-risk groups to the Blues.

“This relief was necessary,” he said, “because the Blues were getting stuck with the worst groups and they had no flexibility in setting premiums at all. But we wanted to restrict the commercial carriers, not squash them.”

Accordingly, Ehardt said the House based its bills upon a model formulated by the National Association of Insurance Commissioners (NAIC) and which now is in use in 34 other states.

The Senate bill, he claims, basically was a Blue Cross/Blue Shield wish list.

Erhardt said that at the end of the House-Senate reconciliation negotiations two weeks ago, conferees discarded the NSIC model and the Blues’ wish list won.

“We got rid of what has been working pretty well in more than half the states and went to a model that isn’t working in Colorado and Florida.”

He said that when the statutes start to phase into effect Jan. 1, they assuredly will discourage the practice of cherry-picking.

But he argues that the reform’s numerous restrictions on commercial carriers also amounts to a legislative sell-out to the Blues. He fears the reform will drive most commercial carriers from the state and virtually end health insurance competition in Michigan.

And the new legislation seems to position the Blues to take advantage of that vacuum.

Erhardt noted that the reform statutes were predicated in part on the premise that Blue Cross/Blue Shield has been losing money disastrously.

Yet, he said, the reform allows Blue Cross/Blue Shield to use its reserves to finance two for-profit insurance operations: one for long-term care, the other for general health insurance.

“At the last minute,” Erhard said, “we at least were able to get in an amendment which will force those corporations to pay state taxes, even if their source of capital is tax-free.”

He predicted that in the next three years, the reform laws for small business health care will send some business groups’ premiums 45 to 50 percent higher, above and beyond the big double-digit increases which already have been occurring in health insurance premiums for several years.

He also believes that of the 400,000 Michigan citizens who are covered by commercial carriers, 50,000 to 75,000 will wind up unable to afford any coverage at all.   

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