How will Detroit's bankruptcy affect insurers?

The city of Detroit has filed for Chapter 9 bankruptcy, and the decision will cause certain ripple effects throughout Michigan's health insurance market, particularly for the state's largest insurer, Blue Cross Blue Shield of Michigan, AIS Health reported.

One possibility could be the city will funnel its employees and retirees, many of which are currently covered by Blue Cross, into the health insurance exchange. Such a move could cost Detroit between $27.5 million and $40 million annually, compared to the city's $140.7 million in retiree health benefits costs for 2014, which could increase to $233.7 million in 2023.

Insurers could take a major hit from Detroit's bankruptcy, as the city is often delinquent on premium payments and owes millions of dollars to several payers, Crain's Detroit Business reported.

Blue Cross has mostly stayed quiet about the bankruptcy filing, saying only that its contracts continue with the city. "We are the largest carrier for active and retiree coverage for the city of Detroit. Our key message is that it is business as usual for us," Blue Cross spokesperson Helen Stojic told AIS Health. "We continue to pay claims. The city of Detroit remains a valued customer."

The Michigan Association of Health Plans (MAHP) has been following Detroit's bankruptcy filing and potential shifting of employees to the online marketplace. "How this plays out in the short term versus the longer term is a consideration here," MAHP Executive Director Rick Murdock told AIS Health. "Legacy costs and retiree coverage may be more of an issue at the moment, but "everything is in play," he said.

In Michigan, it's not just Detroit that's in trouble. The government of Macomb County, just north of Detroit, says its retiree healthcare plan is underfunded by more than $500 million, FierceHealthFinance previously reported.

To learn more:
- read the AIS Health article
- here's the Crain's Detroit Business article

 

Suggested Articles

States want to try value-based payment models for drug costs, but there are plenty of barriers to implementation, according to a new report.

Oncology centers blasted a Trump administration proposal to bundle Medicare payments for radiation therapy.

At least six states are creating their own health insurance marketplaces or seriously considering doing so.