LANSING – Private insurance companies would not be able to increase premiums on customers because they get sick and Blue Cross Blue Shield of Michigan would have to use its reserves to cover its own costs or to help out those who cannot afford insurance under a plan unveiled Wednesday by Senate Health Policy Committee Chair Sen. Tom George (R-Kalamazoo).
The plan, and the extensive hearings schedule George outlined, received a chilly reception from both sides of his committee and from some of the interest groups involved.
George said he focused more on consumer protection issues in his substitutes for HB 5282 , HB 5283 and HB 5284 , arguing that neither current rates nor the size of the market were significant issues.
“We heard that it’s utilization and behavior that drives rates,” he said.
He pointed to testimony that showed the state was fourth lowest for average individual policy rates and third lowest for average family policy rates. And he said there was conflicting testimony over both how large the market is now (between 100,000 and 200,000 customers) and how much it will grow (“by 25 percent” or “to 25 percent”).
He said recent U.S. Census data countered the arguments that the market was growing swiftly as supporters of the House package argued.
The problems, he said, were ensuring that residents could afford and keep their insurance. While he said neither re-underwriting, where customers have their rates increased if they become ill, or recission, where insurance companies refuse to pay a claim because of an alleged defect in the policy application, were shown to be problems in the testimony to the committee, but he said both issues should be addressed.
His proposal would allow underwriting of policies only at the initial application and would require all future premium changes to be based on those findings. And the bills would clarify the line between fraud on an application and a mistake that could not be held against the customer in filing a claim.
The bills also would provide customers more protection in moving to a new policy if the company cancels the benefit plan under which their current policy was written.
The bills would retain the Blues as the insurer of last resort but would have more freedom in its rating.
“Blue Cross has pure community rating as is not able to consider the behavior of its subscribers,” George said. “I propose we give them that.”
The bills would allow higher rates to smokers and those who do not participate in health screenings and wellness programs covered under the policy.
“They deserve the right to rate based on the behavior of their subscribers, but we need to protect people with preexisting conditions,” George said.
The bills would not, however, reduce the exclusion time for covering preexisting conditions as the House package did.
Arguing that Blue Cross had used its surplus to purchase subsidiaries, George proposed that the amount of that surplus be limited. If the commissioner of the Office of Financial and Insurance Services finds the surplus is excessive, the extra would be deposited in a new Charitable and Social Mission Fund, overseen by OFIS, to provide assistance to low-income persons trying to purchase insurance.
“The surplus is the property of the people of Michigan,” George said.
Though Blue Cross would be limited in purchasing new subsidiaries, its primary subsidiary, the Accident Fund, would be able to expand. The proposal would allow the Accident Fund to take on new lines of business in exchange for a $100 million payment to the Charitable and Social Mission Fund.
“The people of Michigan deserve an additional payment for granting this expansion of license,” George said, arguing the original purchase agreement restricted the Accident Fund to worker’s compensation insurance, which it had provided as a state agency.
With the substitutes released, George scheduled hearings on March 26, April 16, April 23 and April 30 as well as tentative hearings on April 2 and April 14, arguing the plan needed a full public vetting.
Some committee members disagreed with the need for that much further discussion.
“I believe that we’ve heard enough testimony that it’s time for us to take action,” said Sen. Hansen Clarke (D-Detroit). “I believe we should make a decision very shortly on a direction we want to take.”
He committed to working with George to report a package before the Senate leaves on spring break.
“This market has already demonstrated we need to act in a timely fashion,” said Sen. John Gleason (D-Flushing), who said he could accept some of the proposal. “There are many points in this proposal that I agree with and some that I haven’t figured out what the results would be,” he said.
Sen. Bruce Patterson (R-Canton) also argued against waiting until the end of the month before beginning to vote on George’s or any other proposals.
“I just hope that we recognize what due diligence is and what obstructionism is,” said Sen. Alan Sanborn (R-Richmond), arguing both for quicker action and against any amendments or substitutes that would permanently stall action on changes to the individual market regulations.
Members also said there needed to be room to discuss proposals other than George’s. Patterson said he had been working on some changes to the House bills. “I want an opportunity to offer the amendments I’ve been working on,” he said.
Sen. Gilda Jacobs (D-Huntington Woods) and others said they were aware of several substitutes that had not yet been distributed to members and asked that those also be considered before any final committee action. “If there is another sent of proposals, I hope we can see them at the same time,” she said.
Committee members also raised concerns about the proposal as presented.
Patterson disagreed with one basic premise of George’s proposal: that the Blues’ surpluses belonged to the people. “I haven’t made that legal finding,” he said. “I’m not sure that I’m willing to concede that the surplus I helped to create be transferred to other people.”
He also questioned whether the state could charge the Blues more to expand the Accident Fund since the latter is a for-profit corporation and the sale has been completed for more than a decade.
“I’m very concerned about the elimination of the establishment of a high risk pool,” said Sen. Jason Allen (R-Traverse City). “Ford, Chrylser and GM, which have been the mainstay of Blue Cross, are not going to be in the same shape as they were in this generation.”
He said the fund was needed to be sure the burden of the most ill residents did not fall solely on Blue Cross as more healthy residents moved to other insurers.
George said his proposal was released as a starting point and he expected more discussions and amendments.
John Truscott, spokesperson for Consumers for Fair and Affordable Insurance Reform, a group of businesses and business groups including Blue Cross, said he was still studying the proposal but argued it did little to achieve the goals of the House package. “At least on the surface it doesn’t seem to go anywhere in terms of addressing the individual market,” he said. “It’s punitive to Blue Cross rather than helpful to individuals who need quality health insurance.”
Other groups working on the issue largely welcomed the additional discussion.
“Today’s news that the Senate will continue to thoroughly deliberate legislation to reform the individual insurance market is welcome news for all Michigan consumers,” said Denise DeCook, spokeswoman for the Coalition for Access and Affordability in Michigan, which represents commercial insurers. “The proposed substitute bills outlined today appear scheduled to receive the same thoughtful consideration that Senate Health Policy Chairman Tom George and his committee have shown i
