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Changes could make Blue Cross Blue Shield a nonprofit mutual

The Michigan Attorney General's office negotiated lower price hikes for individual policy holders.
The Michigan Attorney General's office negotiated lower price hikes for individual policy holders.

The measure to make Blue Cross Blue Shield a nonprofit mutual is under way.

Peter Luke of Bridge Magazine spoke with Cyndy about health care changes in Michigan.

According to Luke, the reform would put Blue Cross into the hands of policy holders.

“They [Blue Cross Blue Shield] have 70 percent of the market share and in some forms of business, critical to this legislation, they have almost 100 percent. Most of their role is in administrative capacity. For 70 years they’ve been a benevolent trust established by the State of Michigan to be the insurer of last-resort and that was codified in 1980. What this law does is turn them into a nonprofit mutual so they’re no longer owned by the people of Michigan but by the policy holders.”

Luke said the legislation’s purpose is to allow Blue Cross to participate in state-level exchanges.

“Blue Cross argued that under the Affordable Care Act, they require consistent regulation with other insurers at the state level to participate in exchanges that will be set up. They said the regulatory framework for putting those policies onto the exchange was too cumbersome. Right now, it’s a fairly rigorous rate review process that allows for public intervention, intervention by the Attorney General and by insurance staff. Under this, it becomes basically a file and use system.”

Critics of the legislation worry that the more Blue Cross controls the market, the more they also control prices.

“Any time you deregulate a monopoly, the tendency is for the monopoly to enjoy that regulatory freedom…there is a price restraint build into the ACA in that insurers have to spend at least 80 percent of their revenue on care. The big area of concern is with Medigap Policies. 200,000 seniors in the state use it to supplement their Medicare coverage…It’s heavily subsidized. Rates will continue to be frozen through 2016 per 2011 agreement with the Attorney General. After that, there is a question as to whether or not Blue Cross will even offer Medigap policies,” said Luke.

For senior health care, Blue Cross suggests Medicare Advantage- which allows for individual insurers to offer broader coverage packages outside of Medicare.

However, some argue that these options come with higher co-pays and could be less portable than Medigap.

According to Luke, Blue Cross is behind the reform.

“Blue Cross came to the Governor and said, ‘We need to compete on these Affordable Care Act Exchanges. We need regulatory relief.’”

Luke noted various changes the reform may bring.

“Providers actually get some relief… Blue Cross used its market dominance to extract some concessions from providers. The whole healthcare landscape is going to change for a number of reasons. Obviously you have the Affordable Care Act, because of that you’re going to have more people in the individual market as employers. You have a whole baby boomer population that is entering Medicare now, in terms of Medigap coverage, the Affordable Care Act doesn’t really regulate Medigap,” said Luke.

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