Blue Cross agrees to lower Medigap rate hike

Blue Cross Blue Shield of Michigan is increasing its Medicare supplemental rates 9 percent instead of the 21.7 percent rate hike it originally proposed after the insurer talked with the state attorney general and the insurance office, reports the Associated Press.

Michigan Insurance Commissioner Kevin Clinton approved the 9 percent increase because it was better than the alternative. However, he ended subsidies for out-of-state residents who buy Medigap, so about 8,600 out-of-state residents will see a nearly 75 percent hike, reports the Detroit News.

As part of the agreement, Blue Cross said it wouldn't create a new rate schedule that based premiums on a senior's income, according to a statement. If that proposal had been allowed, rates for low-income seniors would have dropped $16 a month, whereas rates for former workers at such large companies as Chrysler and Ford workers would have gone up to $194 a month, notes the Detroit Free Press.

State Attorney General Bill Schuette said the settlement will save seniors about $35 million from the initial proposal. Most Michigan Medigap subscribers' rates will increase from $111 a month to $121 a month. Non-Michigan residents will see rates go up from $111 a month to $194 a month. The rates are effective Aug. 1.

Underwriting losses for Medigap policies totaled $200 million in 2010. Blues spokesman Andy Hetzel said the insurer expects to continue losing money on its Medigap policies, despite the rate hikes.

To learn more:
- here's the BCBSM statement
- read the Detroit News story
- see the Detroit Free Press article
- check out the Associated Press piece