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Business Review Western MI
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AG probes Blues as insurance reform vote pends
(2008-05-02)
(wgvu) - AG probes Blues as insurance reform vote pends

May 1, 2008

by Gary Gosselin
Michigan Business Review

The Michigan Senate Health Policy Committee plans to vote on a health insurance market reform measure May 1, as the state's largest insurer seeks a backstop to its individual market risk but critics warn of increasing monopolization of the state health coverage market.

The Michigan Attorney General's office, meanwhile, is looking into purchase of companies by Blue Cross Blue Shield of Michigan as potentially beyond the scope of the state's tax-exempt insurer of last resort.

"We're taking a look at it, we have not concluded anything at this time and beyond that I can't comment," said Rusty Hills, spokesman for the AG's office.

"We have received a request for information from the attorney general's office. We believe it is an attempt to confirm a proper transaction and nothing more," BCBSM said in a statement. "The attorney general and insurance commissioner were notified of these transactions in previous years and raised no concerns. In fact, regulators in Michigan, Wisconsin, California and Washington, D.C., were notified of these transactions in advance and raised no concerns regarding the legality or any parties' authority.

"These transactions are proper and fully authorized under applicable law and regulation."

BCBSM has used its surplus, which now stands at $2.8 billion, to purchase for-profit subsidiaries, which it says helps pay for the nonprofit to continue as the state's insurer of last resort.

The issue arose during Senate Health Policy Committee testimony on individual insurance market reform, by an opponent of the legislation (HB 5282-5285) passed by the House last fall.

Nicknamed the "Blues Bills," the house version is backed by BCBSM and would limit rate increases at renewal time; create a Blue Cross/Blue Shield-administered Guaranteed Access Plan insurance pool for those denied at other carriers; and allow BCBS subsidiary Accident Fund to sell other lines of insurance in addition to its workers compensation product.

The measure would allow insurers to set initial rates depending on medical condition, age and geography, which could mean increases of up to 80 percent for those with a preexisting condition and increases of up to 250 percent for those with serious illnesses such as cancer.

Insurers would have a cap on profits and have to pay out 70 percent of premium and would pay into the GAP to cover extra costs associated with guaranteeing insurance to high risk individuals.

Two substitutes have come out of the Senate committee.

The first, by Sen. Tom George R-Kalamazoo, would eliminate the GAP pool provision, directs BCBSM to pay $100 million for subsidiary Accident Fund to enter the broader insurance market and also would give the state any overages in mandated surplus.

The second, by Sen. Jason Allen R-Traverse City, closely resembles the House bills with a GAP pool and no charge for Accident Fund to expand coverage, but would allow more oversight by the state than the House version. Allen's plan has been endorsed by BCBSM.
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