Major changes needed to proposed Blues deregulation bills to avoid creating powerful deregulated monopoly, MAHP says

LANSING, Mich., Sept. 20, 2012 /PRNewswire/ -- MAHP Executive Director Rick Murdock today told the Senate Health Policy Committee that significant changes are necessary to the proposed Blue Cross deregulation bills if Michigan is to improve competitiveness in the state's health insurance bills.

Murdock noted that Blue Cross Blue Shield has 70 percent of Michigan's commercial insurance market – a monopoly by any measure – and that the bills as they are now in the committee would simply create a deregulated monopoly, with dire consequences to state consumers and health care providers.

American Medical Association has reported that Michigan has the fourth worst competitive marketplace in the nation, due to the Blue Cross monopoly dominance in every market region.

"We hope that the proposed reform of BCBSM will take place under the shared objective of Michigan striving to become the MOST competitive marketplace in the nation – which means by definition, no company be permitted to have a monopoly position in any of the commercial markets of the state," said Murdock.

To accomplish that goal, the change in Blue Cross' status to a mutual insurance company must include the following provisions, most of which must be included in law:

  1. No insurance company should be allowed to use "most favored nation" clauses in contract with providers that guarantee they pay the lowest rates to those providers. The state insurance commissioner recently issued orders proscribing Blue Cross' use of these clauses, which are currently the subject of a federal anti-trust lawsuit brought by the U.S. Department of Justice and Michigan Attorney General. Those orders should be codified in state law.
  2. Language regarding the need for all carriers – including BCBSM – to pay their fair share of uncompensated care caused by shortfalls in Medicare and Medicaid. Blue Cross has admitted refusing to pay its fair share, shoving those costs onto other insurers. The insurance commissioner currently is using his power under PA 350 to investigate Blue Cross' behavior, but will not have that power once they become a mutual insurer unless it is specifically included in legislation.
  3. Language that would clearly specify the payouts to the State of Michigan and language that would clarify that the proposed non-profit organization be the recipient of these funds and that the funds would be at arm's length from BCBSM and not among its subsidiaries.
  4. Language that would provide protection and full recovery of assets to the State of Michigan in the event of a sale of BCBSM to a for-profit company or conversion to a for-profit mutual. Blue Cross was created by the state; its assets should belong to the state in event of a sale.
  5. Language providing protection for Michigan citizens regarding the definition of monopoly and the appropriate additional oversight that may be necessary whenever a company exceeds that threshold on a statewide basis.
  6. Language that addresses the misalignment of sections of the insurance code with the Affordable Care Act requirements.

Murdock also called for the new law to incorporate provisions of PA 350 that protect consumers, including provisions that:  (1) premium rates must not be inadequate (protecting against predatory pricing); (2) products cannot be packaged with subsidiary products; (3) oversight by the AG; (4) Blue Cross and all insurers are required to pay its fair share of hospital financial requirements; (5) caps on surplus; and (6) limitations on investments and acquisitions. 

"We want to make Michigan the most competitive state for health insurance," Murdock said. "We trust Michigan policymakers share that same goal. There clearly must be a transition period to reach that objective. Simply and abruptly converting to a non-profit mutual WITHOUT adopting any other change that affect the competitive environment maintains the current 'monopoly status,' effectively creates a deregulated monopoly in the health insurance arena. That will lead to businesses and families paying more than necessary for health insurance in Michigan, hurting health care providers. Only a truly competitive market will ensure low rates, high quality and access to health insurance in Michigan."

The Michigan Association of Health Plans (MAHP) is an industry voice for Michigan's health care plans. MAHP facilitates communication among members, government, and the industry regarding health care issues of common concern. The mission of the Michigan Association of Health Plans is to provide leadership for the promotion and advocacy of high quality, affordable, accessible health care for the citizens of Michigan.

SOURCE Michigan Association of Health Plans