Michigan Judge Rules Against Blue Cross Blue Shield Rate Hikes, Cites Large Surplus

Main Category: Health Insurance / Medical Insurance
Also Included In: Medical Malpractice / Litigation
Article Date: 19 May 2008 - 9:00 PDT

email to a friend   printer friendly   view / write opinions   rate article

A Michigan administrative law judge on Wednesday ruled that Blue Cross Blue Shield of Michigan would not be justified in increasing premiums by 24% to 42% for individual health insurance plans, the Detroit Free Press reports. BCBS of Michigan, a not-for-profit company, is the state's insurer of last resort and must seek state approval for all premium rate increases. BCBS filed a petition in October 2006 to raise rates for seven of 12 individual policies, which would affect about 22,000 state residents, according to Joe Aoun, the attorney representing the Ann Arbor, Mich., couple who filed suit against the proposed rate increases in 2006.

In his ruling, Judge David Lick said the insurer's $2.4 billion in reserves is "very high by any standard" and "subscribers should receive the entire benefit of the power and the financial position" of BCBS. He also cited a 1980 state law governing BCBS that states the insurer's money and property "shall be acquired, held and disposed of only for the lawful purposes of the corporation and for the benefit of the subscribers of the corporation as a whole." The ruling also said that BCBS should use its earnings and surplus to help expand access to health care for the state's uninsured residents and Medicaid beneficiaries. In addition, Lick said BCBS' annual administrative cost growth should be reduced to 3% from the 5% the company estimated. BCBS also should not assess a 1% charge to individuals to subsidize supplemental Medicare and group conversion policies for people who previously had employer-sponsored health coverage, according to the ruling.

BCBS spokesperson Helen Stojic said the insurer is losing money on individual policies, adding, "This has gone on for longer than a year. No other insurance company has to go through this exceedingly long process to make their rates reflective of the medical costs of insurance." According to Stojic, BCBS' reserves are less than the maximum allowed by the state and are needed to handle potential emergencies. She added that Lick's ruling is "part of a bigger process" and "not a final judgment." Aoun said the ruling could have implications for businesses and the 4.6 million state residents with BCBS coverage.

The ruling must be approved by the Michigan Office of Financial and Insurance Regulations. BCBS and Aoun have 30 days to contact Lick with any concerns they have about the decision (Anstett, Detroit Free Press, 5/15).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.