Last year BCBSM (Blue Cross Blue Shield of Michigan) requested approval to increase rates in Michigan by more than 70 percent. The rate hike would affect about 400,000 BCBS members. Including around 209,000 seniors who have supplemental Medicare.
So the rate increase may or may not affect me. Why the requested increase?
BCBS MI justified the request by claiming projected losses in the individual health insurance market would be close to $210 million. Over three years up to $1 billion. According to a report from BCBSM released, the loss on individual under-65 insurance plans was $94 million and $186 million on Medicare Supplemental (Medigap). Thats a total underwriting loss of $257 million. While overall BC/BS MI posted net income of $12 million in 2009, no company or non-profit can sustain itself long term posting large losses.
What does BCBSM have to say?
According to BCBS the reasons for the individual medical losses were familar:
The state’s broken regulatory system will continue to drag down financial performance in the individual market until a fair and balanced system is put in place. The current system allows out-of-state for-profit insurers and nonprofit HMOs to reject unhealthier and costlier-to-insure applicants in the individual insurance market. BCBSM accepts all applicants, regardless of their condition or cost. BCBSM had a $280 million underwriting loss in its individual lines of business in 2009, including $94 million in its individual under-age-65 products and $186 million in Medicare Supplemental (Medigap).
Why Health Care Reform May Help
Michigan has been unique in that we had a preview of what guaranteed issue health insurance looks like. As a non-profit. Blue Cross of Michigan is required to insure those with pre-existing conditions.
Health care reform will level the playing field. Out-of-state health insurance companies will eventually be required to accept all conditions as well. With this requirement will bring rate increase adjustments. The increases will bring rates in line with what some Michigan residents would say are uncompetitive rates from BCSBS.
Due to name recognition and their long history of insuring Michigan residents, BCBSM stands to benefit greatly from these changes. As well they should, considering they have had to compete in a market with one hand tied behind their back.