Robert Boys, 73, holds his medical and Blue Cross Blue Shield of Michigan bills at his Brighton home. The insurer is seeking to raise the rates on his Medigap policy by 31 percent, to $140.29 a month. (John M. Galloway / The Detroit News)
Robert Boys is 73 years old, lives on a fixed income, and worries he'll soon have to shell out another $33.20 a month on health premiums.
His insurer, Blue Cross Blue Shield of Michigan, is seeking to raise the rates on his Medigap policy by 31 percent, to $140.29 a month, as part of a broader proposal to increase rates on its entire line of individual insurance plans -- policies for people who buy their own medical coverage. Blue Cross says it needs to raise rates to stem growing losses incurred in the individual market.
"They are hitting the people that can least afford it," said Boys, who lives in Brighton. "I'm trying to live on Social Security right now. What do I cut now?"
Boys is not alone in his worries. Many Blue Cross members are troubled by the insurer's proposed rate increases, which are now under review by state insurance regulators. They say the increases are too extreme and ill-timed with the state's unemployment rate in the double-digits -- the highest in decades.
On Monday, state regulators deemed the Blue Cross rate filing complete and will now go about notifying Blue Cross members, as well as other industry stakeholders and the state's attorney general, of the insurer's request. Once those steps are complete, members will have a chance to weigh in by requesting a rate hearing to challenge the increases.
The rate hikes are among the highest proposed by Blue Cross in the last five years and will affect about 400,000 Blue Cross members, including 209,000 seniors who buy their supplemental Medicare plans, known as Medigap.
Depending on the insurance plan, the proposed increases range from a few percentage points to as much as 72 percent for some of the insurer's age-rated plans, such as Individual Care Blue. Blue Cross's Medigap enrollees will see increases of 31 percent, but the hike won't affect Medicare Advantage members.
Blue Cross says the increases are necessary to stanch red ink flowing from its individual health plans and come as part of several cost-cutting moves announced in January by the insurer, including a work force reduction of about 1,000 positions.
As the state's insurer of last resort -- a responsibility tied to its tax-exempt status -- Blue Cross must cover all Michigan residents, regardless of their medical history. But that arrangement, Blue Cross officials say, leaves them with the state's costliest members because those customers are routinely rejected by other private insurers because of pre-existing medical conditions.
"The need for the increases is driven by a broken regulatory system in the individual insurance market that has not changed in nearly 30 years," Blue Cross spokeswoman Helen Stojic said.
Millions in losses claimed
Blue Cross has spent more than a year pushing for legislation changes to give the insurer more leeway in raising monthly rates, an effort that fizzled last December when state lawmakers let the measure die.
Blue Cross now says its losses in the individual market -- expected to increase in 2009 to $210 million -- could jeopardize the organization's long-term financial health.
Some Blue Cross critics, including the Michigan Attorney General Mike Cox, aren't so sure and have questioned the way the insurer is calculating those losses, saying they aren't as large as Blue Cross claims.
Lidia Abate of Farmington Hills is one Blue Cross subscriber eager to voice her opposition.
At age 59, Abate said she pays $286 a month for her Flexible Blue PPO. Her 89-year-old mother also spends another $107.09 a month for her Blue Cross Medigap policy. Under the proposed rate increase, her monthly premiums will rise only 3 percent but her mother's will go up 31 percent to about $140 a month.
"Luckily, she has us lending her a hand with her rent. Can you imagine how many older people will be in trouble if this happens?" said Abate, who lost her job at a physical therapy firm last year. Any increase to her policy will also strain the family's budget, Abate said. "We do have a mortgage and cars and bills and the 401(k) is in the toilet," she added.
Rate increase OK'd in 2008
Blue Cross received state approval last year to raise rates on about 20,000 members enrolled in individual plans, a hike that ranged from 40.6 percent for the high option to 22.49 percent or the moderate-level plans. The final increases approved by the insurance commission were lower than Blue Cross had requested, but still too high for member Ghada Abraham, who challenged the rate hikes before their approval by the insurance commissioner and continues to fight them on appeal.
"Blue Cross was created to make coverage affordable, yet the opposite is happening," said Joseph Aoun, an Ann Arbor attorney representing Abraham, who has the moderate option of Blue Basic and saw her monthly rates increase from $459 to $562 last year. Now, Blue Cross's request could send their premiums up another 63 percent to $917 a month.
"These increases, on top of the large increase they have received in years past, put coverage beyond the reach of the average resident," Aoun said.
Blue Cross said it sympathizes with its individual members, particularly those on fixed incomes or who have lost their jobs.
"Blue Cross wants to continue providing coverage to the vulnerable. But we need a regulatory system that works," Stojic said, adding that the market for individual policies has grown rapidly, saddling the Blues with a greater financial burden than their private-sector competitors.
Blue Cross expects to add another 76,000 individual members in 2009 and its actuaries project losses of up to $1 billion on its individual policies over the next three years. Financial information released in March by Blue Cross shows the insurer lost about $133.2 million on its individual policies in 2008 -- a slight improvement from the previous year's losses of $134 million. Still, Blue Cross says, the losses incurred on individual insurance dragged down the insurer's bottom line last year, contributing to a net loss of $144.9 million for 2008.