Small market reform would only result in trimming a few percentage points at best in the long term from the steep premium increases experienced in recent years by subscribers of Blue Cross Blue Shield of Michigan, which insures about 70 percent of the small businesses in Michigan.
“It would be misleading to suggest market reform is a silver bullet,” said Rich Cole, the Blues’ senior vice president for corporate communications.
Key factors driving the rapidly rising cost of health care — booming utilization rates and costly medical technologies and pharmaceuticals among them — are far too much for market reform in Michigan to generate a major corresponding offset in annual double-digit health insurance premium increases, Cole said.
“Anybody that thinks it’s going to be a dramatic difference in rates would be misled,” he said, tempering expectations about the potential benefits of market reform for ratepayers. “It will be significant, but it has to be viewed in the context of what you have overall.”
Still, given the size of the annual increases in premiums the last four years, including an average 22 percent rise for 2003 by Blue Cross Blue Shield of Michigan, business groups are eager to revisit the issue and push for action in Lansing that can at least begin to mitigate the trend to some degree.
“It’s going to benefit in the margins,” Grand Rapids Area Chamber of Commerce President John Brown said.
Small group market reform, after dying in 2002 when former Gov. John Engler was unable to push through his proposal amid a wall of opposition from the Blues, is at or near the top of many agendas in Lansing. A coalition of business and labor interests the Blues formed last year to push market reform has been working to formulate a new proposal.
Even incremental shavings off the kinds of rate increases seen in recent years can add up, Brown said. Just stemming the rate of annual premium increases can help, Brown said.
Reforming the insurance market in Michigan is “really one small part of the whole health care discussion” and is among the many changes that need to occur to get the costs of health care under control, he said.
That’s not everything, but it’s very worthwhile to the business community. It’s something we can do right now, so let’s do it and let’s get on to other things,” Brown said. “Anything that provides relief, given the cost of health care, that is not small change month after month after month.”
Amid that desire, parties with a stake in the Blues and small market reform are anxiously waiting to hear if Granholm addresses the issue in her first State of the State address scheduled for Tuesday night.
Engler brought the issue to the forefront a year ago in his final State of the State address when he called for changes in state laws governing the Blues, the “insurer of last resort” for Michigan residents. Engler sought greater regulatory oversight over the insurer, market reforms to enable Blue Cross Blue Shield to better compete with commercial carriers and bring new competitors into the state, and a restructuring of the Blues’ board of directors that he described as “cumbersome” and “dominated and driven by special interests” into a smaller group.
Blue Cross Blue Shield of Michigan, the state’s largest health insurer with more than 4.8 million subscribers in its health plans, adamantly opposed any changes in its board and state regulations, and only wanted to see reforms in the small-group insurance market to alleviate what’s known as adverse selection. That’s the alleged practice of commercial carriers targeting younger, healthier employee groups, leaving the Blues with a pool of subscribers that’s costlier to insure, resulting in large, annual premium increases.
The Blues marshaled its political allies against Engler’s plan and won. After months of political wrangling, legislation to implement the governor’s proposal died at the end of the legislative session in 2002.
Granholm, appearing on WGVU-TV’s “West Michigan Week” on Friday, indicated that she plans to pursue a legislative package that will alleviate the “cherry picking” of Blues customers by commercial carriers.
“We need to look at market-based reforms,” Granholm said.
Even if Granholm does not offer her views on the topic Tuesday night, the stage is set in Lansing to take up small market reform again in 2003, Cole said.
“There are a lot of people who’ve come together and said they’re ready to go,” he said. “Both political parties realize that small business is in play and realize this is the No. 1 issue for small businesses. The legislative leadership in both parties has given us the high sign.”
That leaves one of the remaining questions whether Granholm will pursue the issue in the same manner as her predecessor — tying market reforms to changes in the composition of the Blues’ board and regulatory reforms.
One of the key players in last year’s debate says that although he believes all three are still necessary to generate “the greatest effect,” he can accept going forward on market reform alone and would help the governor and Legislature craft a legislative proposal.
“This year that’s the approach that has the greatest potential for success,” state Office of Financial and Insurance Services Commissioner Frank Fitzgerald said. “We’ll work with them in whatever way possible.”
But even bipartisan cooperation and the successful passage of a reform package will result in minimal rate relief, Fitzgerald said.
“It doesn’t mean we’re going to have dramatic cuts,” he said. “It means we’re going to have greater stability in the market and avoid the major upticks we’ve seen in the past.”