About Our Request to Increase Individual Product Premiums
On May 21, 2010, BCBSM requested approval for premium increases for our health plans for individual consumers under age 65.
The mere fact that BCBSM requested approval is important.
We are the only health plan in Michigan that must obtain regulatory approval for new premiums in the individual market – and we are the only health plan that is transparent to the public with individual market rate requests.
Many Michigan consumers are struggling, no doubt. The economy is challenging. In fact, many people who obtain individual health coverage from BCBSM need it because their jobs have been lost, or their employers have stopped offering coverage. We recognize and respect these personal struggles.
But BCBSM – by law – must run a self-sustaining health insurance business. We lost $94 million on these individual products in 2009.
As much as our regulators have control over the prices we set in the individual market, they also rightfully demand that our company be financially sound. That is the only way for BCBSM to accomplish its unique mission and serve its longstanding safety net role in Michigan health care – accepting applicants, regardless of their medical history or condition. We must run a financially sound business in order to continue this role.
BCBSM is requesting a 7.8% increase for its individual “PLUS” group conversion products and a 9.9% increase for its individual “PLUS” products. Other individual products and group conversion would receive 15% and 12% increases, respectively.
Here are some answers to basic questions people might have about these proposed rate increases:
Why are you asking to increase my rates?
These increases apply only to products offered to individuals, under age 65, who are not covered by employer group plans. We are very sensitive to the economy and its impact on our subscribers, but we cannot allow medical costs to continue to increase without adjusting our rates. So we are trying to strike a delicate balance between doing the right thing for our business and our subscribers.
These increases are lower than the rates the company should have requested to break even on our individual product line.
Even if BCBSM is granted the full increases we requested, we expect medical costs to continue to exceed premiums in our individual line of business, and we expect to lose at least $40 million on these plans in 2011.
How much are the requested increases?
Rates would vary based on the product, and recommended rates for all products are provided in our public filing with the state. BCBSM is transparent on its rate setting in the individual market, and we believe regulators should consider requiring all other health insurance companies to be equally clear with consumers before they increase their individual premiums.
Why is BCBSM experiencing losses on individual products?
BCBSM is the only health insurance company in Michigan that never rejects people with serious medical conditions for enrollment. As the individual market has grown, and as all other health plans in Michigan continue to reject people who are more expensive to cover, BCBSM’s individual insurance pool (all the people we cover in the individual market) has grown more costly to insure.
The result is that Blue Cross every year spends significantly more paying for medical costs for our individual subscribers than we collect in premiums. This will continue to be the case, even if we are granted the full increases we are requesting. Even with the premium increases requested today, BCBSM anticipates it will lose between $40 million and $60 million on under-age-65 individual products in 2011.
But I am healthy. Why are my premiums increasing?
BCBSM community rates its individual plans – which means that our premiums do not discriminate between someone who is healthy, and someone who is unhealthy or who requires more frequent medical services to maintain their health.
Why can’t BCBSM use its reserves instead of raising rates?
Our reserves exist to provide security for all of our nearly 4.4 million subscribers – ensuring that the company that covers their health needs is financially sound. The membership in our individual plans is about 200,000 people.
BCBSM pays out more than $2 million every hour in medical and pharmacy claims. Our reserves are far below the maximum cap set by state law.
Court decisions have found that unless BCBSM reserves are excessive, BCBSM is not required to use reserves to subsidize one line of business over the others.
When would the new premiums go into effect?
We have asked that our new rates go into effect in October 2010 under the proposal. The state must approve our premiums prior to them taking effect.
Will I receive notice before any rate increase appears on my bill?
Yes. Subscribers will receive notification of a premium increase 30 days prior to the increase appearing on your bill.
Does the rate request affect Medigap products?
No. The request does not affect BCBSM Medicare Supplemental plans (Medigap) purchased by Medicare-eligible beneficiaries.
Does the rate request affect BCBSM health plans purchased by employers (group coverage)?
No. The request does not affect BCBSM health plans purchased by employers.
What is BCBSM doing to keep rates low?
Insurance premiums in the individual market are driven by medical costs. As the only health insurer in Michigan that guarantees coverage for people with pre-existing conditions, our medical costs are higher than they would be if other insurers would take responsibility for covering people who are more costly.
To control medical costs and improve health care for people, BCBSM works every day with doctors and hospitals to improve the quality of healthcare, eliminate medical errors and combat healthcare fraud. This report details our efforts working with doctors, hospitals and other health care providers.
Isn’t BCBSM tax-exempt?
BCBSM does not pay taxes to the state or local governments, but BCBSM does not profit from its tax exemption. An independent analysis of our tax exempt value and our regulatory requirements found that BCBSM returns at least $391 million – several times the value of its state tax exemption – to Michigan through contributions such as helping provide access to health care for children by supporting the MIChild program, providing discounts on Medigap plans for older adults, and through other contributions.
What other less costly product options can I consider and where can I get the information?
Even with anticipated rate increases, BCBSM individual products remain some of most affordable individual products in our state. You can click through this online tutorial that will help you pick a plan that is right for you. You can also view benefit and cost information for available products at bcbsm.com.
If you have any questions please contact us at [email protected]
Andy Hetzel, vice president, corporate communications