Blue Cross legislative package undermines consumer interest in affordable health coverage
BCBSM Urged to Use $2.84 Billion Surplus to Avoid Rate Increase, Expand Coverage for Uninsured
Statement of Charles Bell, Programs Director
Consumers Union, publisher of Consumer Reports
Consumers Union, the publisher of Consumer Reports, strongly opposes the Blue Cross-sponsored legislation that would dramatically change the ground rules for individual health insurance in Michigan. These bills (HB 5282, 5283, 5284, 5285) would drive up costs for many consumers and restrict access to coverage. The proposed legislation also contains many harsh anti-consumer provisions such as longer waiting periods for consumers with pre-existing conditions, and elimination of both the policyholders’ and Attorney General’s ability to seek rate hearings. Such measures would hurt consumers across the board, and have very negative impacts for vulnerable groups such as early retirees and chronically ill and disabled consumers who buy their own coverage.
Blue Cross’ unwarranted and unsupported proposals for radically reorganizing the individual market are fatally flawed. They should be squarely rejected by policymakers. We would instead urge the legislature, the Governor and the Michigan OFIS to work to make health insurance more affordable for individuals. Specifically, we would like to BCBSM be required to use its capital base to subsidize premiums in the individual market, and be directed to establish a new insurance product that is affordable to low- and moderate income individuals in Michigan.
As noted by Attorney General Cox, the statutory purpose of Blue Cross under Michigan state law is to expand access to affordable coverage for ALL of the people in Michigan at a fair and reasonable price. Regulators in other states are beginning to take a much closer look at the estimated $20 billion in financial surplus that are held by nonprofit Blue Cross and Blue Shield Plans across the country. In 2005, Pennsylvania’s state insurance commissioner told the state’s four Blue Cross plans to set aside nearly $1 billion in surplus financial reserves for affordable insurance programs. We think a program to require Blue Cross to use its surplus to provide affordable coverage in the individual market would be extremely popular and very much in the interest of Michigan consumers.
Beginning in the 1930s, Blue Cross and Blue Shield plans were created as nonprofit organizations to provide affordable coverage to all segments of the community. In recent years, we have seen Blue Cross plans in many other states abandon their nonprofit missions and convert to for-profit purposes. In the case of a formal conversion, the Blue Cross plan is generally required to achieve regulatory and/or legislative approval for such a conversion, and it must transfer the full fair market value of its charitable assets to another entity, usually in the nonprofit sector, to continue its social mission upon conversion. Some plans have made “creeping conversions” where they gradually reduce their commitment to social programs and shift resources to for-profit subsidiaries.
With over a quarter of Michigan residents uninsured or enrolled in Medicaid, BCBSM must maintain a sharp focus on achieving its nonprofit social mission — or turn its assets over to someone who can. We urge Michigan regulators and legislators to provide strong public oversight of any changes in BCBSM operations to ensure that its assets remain squarely focused on providing affordable coverage to consumers, especially vulnerable groups such as early retirees, unemployed workers, seniors, children, students, low-income residents, and people with chronic illnesses and disabilities. We are circulating a consensus statement opposing the Blue Cross legislative package which has been endorsed by Michigan consumer and health advocacy organizations, and we expect many more organizations will join in the coming weeks.
For more information, contact:
Charles Bell, Programs Director
101 Truman Avenue
Yonkers, NY 10703
Phone: (914) 830-0639 (mobile)