Michigan Lawmakers Introduce Legislation That Would Prevent High Rate Increase For Private Health Plans

Main Category: Health Insurance / Medical Insurance
Article Date: 16 Oct 2007 - 9:00 PDT

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A bipartisan group of Michigan lawmakers on Wednesday proposed four bills that would block private health insurers from significantly raising rates during policy renewals, the Detroit Free Press reports. The legislation also would relax a requirement that the not-for-profit, tax-exempt insurer Blue Cross Blue Shield of Michigan receive approval from the Michigan Office of Financial and Insurance Services to increase rates. The insurer would be able to set rates on its own, and increases would be subject to review if the insurance office found them to be questionable. State Rep. Virgil Smith (D), chair of the state House Insurance Committee, said he hopes to have committee hearings on the legislation soon. "We want to make insurance fair," Smith said on Thursday.

Opposition
Private insurers opposed to the plan this week formed the Coalition for Access and Affordability in Michigan to challenge the legislation. The coalition comprises the Council for Affordable Health Insurance, the Life Insurance Association of Michigan, Aetna, Assurant, Humana, United Healthcare and HealthMarkets.

BCBS is Michigan's insurer of last resort, and it receives $80 million in state tax breaks for the designation, according to the Free Press. Mark Cook, vice president of government affairs at BCBS, said that private insurers "cherry-pick 25-year-olds" and then "jack up the rates" if the policyholder develops a health condition. He claims BCBS ends up with more expensive policyholders and loses money as a result.

However, Frank Venuto, a legal consultant for United Healthcare, said private insurers are prohibited by law from dropping coverage at the time of renewal and that rate increases occur for an entire class of members, not for individual members. In addition, private insurers say they cannot take all applicants because they do not receive the tax breaks BCBS does. BCBS said legislation is needed to hold down rate increases for individuals who purchase private insurance.

According to the Detroit News, BCBS said it is losing millions of dollars on individual insurance policies and needs rate increases to pay for the coverage. Critics of the legislation say BCBS should use its $2.5 billion reserve to offset rate hikes. "We need to make sure that what comes out of this is good for the consumer, not for the Blues, and not for the companies we represent," Venuto said (Anstett, Detroit Free Press, 10/12).

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