Businesses, Labor and Community Groups Form Coalition To Help Blue Cross Blue Shield of Michigan through Financial Troubles

A coalition of more than 150 businesses and labor groups plans to help Blue Cross Blue Shield of Michigan, the state's largest not-for-profit health insurer, through "financial and strategic shortcomings" that turned up in a state audit, the Detroit News reports (Webster, Detroit News, 9/25) The audit, conducted by the Michigan Office of Financial and Insurance Services, found "some disturbing trends" at BCBSM. Over the last five years, BCBSM has lost more than $400 million in the small group market, and Blue Care Network, BCBSM's HMO, lost $134.3 million from 1998 to 2000 and $18.2 million this year. In addition, the audit found that BCBSM's administrative services contract business, which represents half the insurer's premium revenue, has "not been as lucrative as it should be" and that BCBSM has "inadequate" technology systems, which would cost more than $300 million to upgrade. The audit also found that BCBSM, with a 1.8% return rate on investments as a percentage of the firm's total assets, has not received an "adequate return" (Kaiser Daily Health Policy Report, 9/17). The coalition will study "possible solutions," including plans to attract younger employees to the small group market, which has been "hard hit" by increases in the "already-high age of its enrollees" and lack of "young, healthy members" to offset costs. Under state law, BCBSM serves as the "insurer of last resort" and must provide health coverage to all who apply. As a result, BCBSM has "had few tools, except raising premiums," to address problems in the company's small group market, the Detroit News reports. Small business have "balked" at premium increases, and some have "sought insurance elsewhere."

Legislative Solution?
Daniel Loepp, vice president of governmental affairs for BCBSM, said that Michigan might have to modify Public Act 350, a law that regulates BCBSM (Detroit News, 9/25). BCBSM Senior Vice President Richard Cole said the modifying the 1979 law "would allow the company to better respond to the market." He said that the law prevents the company from adjusting small group coverage based on age, a practice used by for-profit insurers, which leaves BCBSM with a "disproportionate number" of older enrollees who often use more health care services. "We want to be competitive. So let's level the playing field with the commercial insurance companies," Cole said (Kaiser Daily Health Policy Report, 9/17).