LANSING — Gov. John Engler wants to preserve the “power of blue” and steer Blue Cross Blue Shield of Michigan (BCBS) clear of serious financial problems in the years ahead through increased regulatory oversight.
Responding to a state audit released in September that outlined trends that it concluded threaten the financial health of BCBS financial viability over the next decade if not reversed, Engler in his annual State of the State address called for changes in state laws governing the “insurer of last resort” for Michigan residents.
Engler asked the Legislature to strengthen the state insurance commissioner’s oversight concerning BCBS finances and the ability to restructure the Blues’ “cumbersome” board of directors. He contends the board is “dominated and driven by special interests” into a smaller group that’s more focused on the organization’s mission of providing health insurance to all at a fair and reasonable cost.
The push comes at a time when annual double-digit increases in health premiums are the norm for employers.
“At a time when so many people feel that the cost of health care is neither fair nor reasonable, we cannot have the commissioner on the sidelines,” Engler said in his Jan. 23 address.
“It is of paramount importance that the Blues be strong, well run, and focused on providing access to health care at a fair and reasonable price. When the health security of so many citizens is dependent on the financial security of a single company, the warning signs must be heeded,” he said.
A BCBS spokesman disagreed with Engler’s characterization of the organization’s board structure and management, saying the Blues’ problems lay with existing state regulations and the need for market reforms. Specifically, he said BCBS wants to see changes made that would alleviate the ability of commercial insurers to cherry-pick younger workers for coverage, leaving the Blues a skewered risk pool to cover.
“We’ve got to say that if you’re going to play in our state, you’ve got to play by some rules of fairness that do not punish the non-profit carriers that are the carrier of last resort,” said Richard Cole, the Blues’ senior vice president for corporate communications.
The nation’s largest independent non-profit health plan, BCBS provides health coverage for more than 4.8 million people in Michigan, about half the state’s population. Created through special legislation enacted in 1939, BCBS is heavily regulated, must provide insurance at a “reasonable cost” and accept any group or person who applies for coverage, regardless of his or her age or health.
After years of trying to gain attention in Lansing to its problems, BCBS says it is “grateful” that the governor has at least elevated the issue to dedicate a good portion of the State of the State address to it.
“We’re quite positive about it,” Cole said. “The most important thing going on here is an acknowledgment that if Blue Cross Blue Shield is going to survive well into the future as a non-profit carrier, there are going to have to be issues addressed.
“It really is the regulatory environment that is cumbersome,” he said.
A triennial state audit conducted last year found that while BCBS is financially stable and solvent for now, it “shows disturbing trends and symptoms” that threaten the affordability of and access to health coverage, Financial and Insurance Services Commissioner Frank Fitzgerald said in September.
Among the findings:
**Blue Cross Blue Shield of Michigan lost more than $400 million over five years in the small group market that provides health insurance to 1.3 million employees at small business with a workforce of 100 or less. The small group market represents more than a quarter of Blue Cross Blue Shield of Michigan’s business mix.
** Deficient information systems that require upgrading at a cost of $300 million or more.
** A cumbersome board and management structure.
Blue Cross Blue Shield of Michigan subsequently formed a coalition consisting of as many as 150 labor, business and civic organizations, trade associations and professional and provider groups that will work with the state to assure the insurer’s long-term viability.
One of the coalition members — the Small Business Association of Michigan — liked the fact that Engler used his address to draw attention to the problems facing Blue Cross Blue Shield of Michigan. The association, however, did not support Engler’s call for increased regulatory oversight of the Blues and, in a statement issued the day after the address, pushed its own ideas for generating increased competition for health carriers in the small business market and protecting small businesses from excessive premium increases.
“State policy makers must act decisively to avert the small business insurance crisis” that was identified in the state audit last year, association President Gary Woodbury said. “The huge jump in the cost of health insurance is the most critical problem facing Michigan’s small business community.”