Don't vilify Michigan's Blue Cross; it practices Obama's health reforms

DANIEL J. LOEPP , Detroit News Opinion, March 3, 2010

The Obama administration and some members of Congress have condemned health insurers, including Blue Cross Blue Shield of Michigan, for raising premiums in the individual market. If this proves anything, perhaps it's that some insurance companies can be vilified despite doing everything that the Obama administration wants us to do in a post-reform world.

We are nonprofit. We never reject anyone for having a pre-existing condition. We charge the same premium regardless of health condition. We self-limit our margins -- earning just one-tenth of 1 percent margin during the past 20 years. Our rates are closely regulated by the state. Our finances are transparent to regulators and the public.

Blue Cross Blue Shield of Michigan works hand-in-hand with the government to promote access to health care. For example, we contribute about $15 million annually to support statewide access to health care for children covered in the state's MI Child program. This helps low-income families -- many struggling through job transitions -- keep their children covered for premiums of $10 a month. It has made Michigan one of the leading states for insuring our children.

What's wrong in Michigan is that Blue Cross Blue Shield is the only health insurance company in the state that operates its business under the guidelines I've described. This fact has been ignored by Washington, but it's the reason our premiums are rising in the individual market.

Michigan's regulatory system has two sets of standards for insurance company behavior. This broken system -- not a profit motive -- is the cause of the very rate increases that have drawn fire from the Obama administration.

In Michigan, Blue Cross Blue Shield is in the unique position of having to cover nearly all individual consumers who are denied coverage by other insurers in our state because of pre- existing conditions. These people are generally more expensive to cover, and this situation has led to a deterioration of the overall health of our insurance pool.

The ultimate and unfortunate effect of this unbalanced regulatory structure is seen in the rates people pay for health care coverage in Michigan.

Michigan's economic challenges have forced many people out of employer-sponsored coverage and into the individual market. In fact, our individual pool has doubled in size since 2006. With nearly all of Michigan's high-cost subscribers in Blue coverage and with medical costs on the rise, our overall costs have escalated. Premiums have not kept pace with costs.

Despite the rate increases we were granted by regulators, Blue Cross Blue Shield of Michigan reported losses of more than $280 million for 2009 on our products that provide health coverage to individual subscribers. Our cumulative financial losses on these products have totaled nearly $1 billion during the last five years.

This extraordinary financial strain is the business rationale for the premium increases we requested from our regulators in 2009. We sought to ensure the 420,000 individual subscribers we cover didn't drain the financial reserves of a nonprofit health plan that covers more than 4.5 million people.

1 The solution to premium pressures in Michigan is fixing the systemic problem of how our market is regulated -- not in vilifying any one company. There are different, but relevant business issues in other states that impact premiums. These local issues need to be respected and brought into focus.

Blue Cross Blue Shield of Michigan, and the entire Blue system, is committed to health reform. Our recommendations include ending the era of medical underwriting, coupled with a personal responsibility requirement to assure everyone obtains coverage. These two reforms together will prevent skyrocketing premiums. We support providing means for lower-income people to obtain coverage. We support collaborative work with health care providers to lower costs by improving quality.

Blue Cross Blue Shield of Michigan is a willing partner with relevant knowledge to share in crafting good public policy. We are prepared to contribute to a national solution.

Daniel J. Loepp is president and CEO of Blue Cross Blue Shield of Michigan in Detroit. E-mail comments to [email protected]">[email protected] or fax them to (313) 496-5253.

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