By: Health Insurance
Submitted: 2009-10-20 13:54:09 | Word Count: 782
Blue Cross Blue Shield of Michigan sees no end to the string of its financial losses, and that could mean an eventual cut in payment to physicians. But state regulators are criticizing the plan for using reserves to buy another plan instead of making coverage less expensive.
"Without regulatory reform, there is a domino affect. If BCBSM faces financial challenges, it is quite likely to cause pressure on all aspects of its business, including effects on reimbursement," Michigan Blues spokeswoman Helen Stojic said in an e-mailed statement.
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That could hit hard, because the plan covers so many of the state's insured. By the AMA's most recent analysis of insurance market share, the Blues held 63% of the combined Michigan market for PPO and HMO health insurance.
"As far as physicians are concerned, they've been a reliable partner," said Richard E. Smith, MD, a Detroit ob-gyn who is president of the Michigan State Medical Society. "We've been able to weather the storm for four or five decades. This year is different -- we're all victims of the economy. Their ability to remain a viable organization is important for the citizens of Michigan as well as physicians."
The nonprofit plan reported a net loss of $46.8 million in the first six months of this year, Stojic said. That comes after a reported $144.9 million in losses for 2008, the most of any single-state nonprofit Blues nationwide. According to financial statements filed with the state, the plan projected a loss of $106.9 million from individual policies for 2009 and $102.9 million in losses on those policies in 2010. The plan did not project overall losses.
Those specific projections come as the Michigan Blues plan presses the state to allow it to raise rates.
In January, when the Michigan Blues announced it was cutting 10% of its employees, the plan requested a 56% rate increase for individual policies for members younger than 65. In August, state regulators approved an average 22% hike effective Oct. 1.
The Michigan Blues is the state-designated insurer of last resort, which means it must cover people who have been rejected by other plans for individual coverage because of preexisting medical conditions. The company has blamed other plans' "cherry-picking" healthy customers in the individual market for its losses.
As of October, it was still waiting for the state to decide if it could raise rates by an average of 31% for its medigap policies, one of the other product lines it loses money on. In the interim, a judge allowed a 4.7% increase, effective Oct. 1. The company has estimated that without its requested rate increase, it will lose $67 million on medigap policies this year and another $59.5 million in 2010.
State law requires the company to subsidize medigap plans to keep them affordable for seniors.Despite ongoing losses, however, as of June 30, the company reported a surplus fund in excess of $2.2 billion.
State Attorney General Mike Cox, who is seeking the Republican nomination for governor in 2010, has been a vociferous critic of the company, saying its reserves should be used to help offset the cost of insurance for subscribers.
The company attracted criticism from Cox and others in September when its subsidiary HMO, Blue Care Network, bought Lansing-based Physicians Health Plan of Mid-Michigan, from Sparrow Health System for an undisclosed amount.
The Michigan Blues argued that Blue Care Network funds are kept separate and were unrelated to its requested rate increases for individual and medigap insurance. But Cox called for the company to disclose how much it paid for the PHP plan and explain how it could afford to buy another health plan while asking for rate increases.
Dr. Smith said he had no comment on the deal.
Meanwhile, the Michigan Blues also face a federal class-action lawsuit brought by a pipefitters union local, alleging that the company overcharged for insurance by tacking an improper fee to its premiums. Stojic said the plan disagrees with the court's ruling and class certification, and is seeking appellate review.
