By: Health Insurance
Submitted: 2009-10-20 13:54:00 | Word Count: 538
Michigan Attorney General Mike Cox asked state and federal regulators Wednesday to review the proposed purchase of a Lansing HMO by Blue Care Network, saying money for the transaction might be better used to hold down rate hikes for the insurer and its parent company, Blue Cross Blue Shield of Michigan.Cox sent the request to the Michigan Office of Financial and Insurance Regulation and the Federal Trade Commission's Bureau of Competition. The letters also raise issues about whether the purchase of the Physicians Health Plan of Mid-Michigan would create a monopoly for Blue Cross companies in the Lansing area, eventually raising prices there if private insurers leave the market.
The letter to Michigan regulators asks for a public hearing on the purchase of PHP and its three subsidiary companies.
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Documents on file with the state office show that Blue Care Network plans to spend $45 million to buy the company and another $15 million for the HMO's estimated cash assets and investments.
Cox, who has raised questions about $350 million for other insurance company purchases by Blue Cross subsidiaries since 2005, is fighting a proposed 31.2% rate increase in Blue Cross Medigap policies that the insurer is seeking to offset mounting losses from its Medigap business.
A Lansing administrative law judge hearing the Medigap case is to rule by Dec. 1. It must be approved by Ken Ross, the state's insurance commissioner.
Ross said in an interview Monday that his staff is exploring the details of the proposed purchase and "what impact, if any, it would have on statewide competitiveness." No decision has been made yet about whether the agency will request a public hearing on the purchase.
Blue Cross has said the purchase will be paid with Blue Care Network reserve funds and that the transaction will allow it to hold down health prices by spreading costs over a larger pool of customers.
The purchase should not hurt competition in a state with a strong HMO market, with more than 20 companies, and would have "little or no impact" on Blue Cross customers, said Helen Stojic, Blue Cross spokeswoman. Other purchases help bring jobs and business to Michigan, the company has said.
But Rick Murdock, executive director of the Michigan Association of Health Plans, said Blue Cross business soars to 95% of the health insurance business in Lansing and East Lansing when the market share of all Blue Cross companies in the area is counted.
As of June 30, Blue Care Network had 530,018 customers statewide, or about 38% of Michigan's non-Medicaid HMO market, and Physicians Health Plan had 41,739 policyholders, or about 2% of that market, Ross said.
