Blue Cross Blue Shield of Michigan commits to helping Legacy Medigap members through long-expected rate changes and eligibility for subsidies

Meghan O'Brien

| 5 min read

BCBSM extends rate freeze for Legacy Medigap members through January 1, 2017; Company doesn’t expect to profit on Medigap despite new rates

DETROIT, July 6, 2016 – Blue Cross Blue Shield of Michigan will extend a freeze on rates for its Legacy Medigap supplement plans to the end of the year. This will enable nearly 200,000 members to prepare for long-expected rate increases that Blue Cross filed today with the state of Michigan. Taking effect Jan. 1, 2017, these increases will be the first for Blue Cross’ Legacy Medigap plans since 2011. Blue Cross also recognized the Michigan Health Endowment Fund for providing financial support to low-income Medigap enrollees after January 1. The Endowment Fund will use some of the $210 million Blue Cross has paid to it since 2014 to subsidize lower-income Michigan residents who purchase Medicare supplement plans. Subsidies will be available to people earning below $26,730 for an individual or $36,045 for a couple. Monthly subsidies are $40 for people 65-75, $65 for people 76 and older, and $125 for people with disabilities under 65. In Southeast Michigan, the rate increases impacting seniors in Legacy Medigap Plan C (BCBSM’s most popular option) range from a low of about $48 per month for a 65-year-old female to a high of about $177 per month for an 80-year-old male. Elsewhere in Michigan, the rate increases will be lower but still substantial. Rate increases for under-65 disabled individuals are higher than those for seniors – about $188 more than today’s rate. “Anyone living on a fixed income is going to be concerned when they are asked to pay more for their insurance coverage,” said Julie Smith, senior vice president for Senior Health Services at BCBSM. “Even though this is our first rate change in five years, we understand the concern this will cause. Blue Cross is working to help our members understand why this change is necessary, and point them to resources and assistance they can trust to inform their decisions. Legacy Medigap is one of many coverage options, and we are committed to working hand-in-hand with our members to ensure they get the right support to make the best decisions.” BCBSM announced a number of decisions to help its members:
  • Extending the rate freeze period through January 1, 2017.
  • Continuing to guarantee Medigap coverage to all applicants, regardless of health condition.
  • Allowing members to remain in the Legacy Medigap plans they have today.
  • Capping rate increases based on age on Legacy Medigap once members reach 80 years old.
  • Not pricing rates for current members based on their health status.
  • Introducing new Medigap plans to give people a variety of coverage options.
Blue Cross is also taking steps to inform members and advocates of the changes:
  • Blue Cross hosted a webinar with senior advocacy organizations this morning.
  • The company’s blog – – will be used as a resource for frequently updated information and perspective.
  • Blue Cross is mailing two letters to members to provide information and context for the changes. The second letter arriving before July 15 includes a special phone number for members to call for questions and personalized support.
Blue Cross does not expect to profit on Medigap plans even after the new rates take effect:
  • BCBSM expects to book $249 million in financial losses this year due to inadequate pricing. The new rates project a lifetime “loss ratio” for all of BCBSM’s Legacy Medigap products of 110 percent – meaning the company will pay more for the health care costs of its members than it collects in premiums from those members.
In the letters being mailed to nearly 200,000 Legacy Medigap members this month, BCBSM spells out the complex reasons behind the changes members will see in Legacy Medigap starting January 1, 2017.
  • A direct subsidy program has ended. The subsidy was put in place in 1980 when BCBSM was regulated under an old law that provided an exemption from state and local taxes. It ended when a new law removed those tax exemptions and enabled BCBSM to become a nonprofit mutual insurer. BCBSM has paid nearly $200 million in new taxes, plus another $210 million of a $1.56 billion commitment to the Health Endowment Fund, since that change in 2014.
  • A five-year rate freeze is ending. The rate freeze on Legacy Medigap essentially extended BCBSM’s direct subsidy program from 2014 to 2016. By the end of 2016, BCBSM will have provided more than $690 million in subsidies to keep the rate freeze in place – all while paying new taxes and making new Health Endowment Fund payments.
  • Rates have not kept up with costs. BCBSM will be pricing its Medigap plans to market rates comparable to those charged by other insurers for similar products. Because of the subsidies and rate freeze, BCBSM’s pricing today is far below the cost of providing medical care for covered members and it undercuts competitors’ prices.
“Blue Cross is committed to serving our members and maintaining access to quality health care for everyone in Michigan,” Smith said. “We are communicating directly with our Legacy Medigap members impacted by this change to assist them with the transition process, whether they keep their current Medigap plan or choose another option that better fits their needs. Blue Cross will continue to offer complete coverage options to all Medicare beneficiaries.” Blue Cross Blue Shield of Michigan, a nonprofit mutual insurance company, is an independent licensee of the Blue Cross and Blue Shield Association. BCBSM provides and administers health benefits to more than 4.5 million members residing in Michigan in addition to employees of Michigan-headquartered companies who reside outside the state. For more company information, visit and
MI Blues Perspectives is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association