Blue Cross vows switch won't hike rates

Blue Cross Blue Shield of Michigan officials vowed that historic legislation signed into law by Gov. Rick Snyder Monday will not raise rates for consumers with its change from a charitable trust into tax-paying, nonprofit mutual liability insurance company.

Snyder said the change is needed to allow the Blues to survive in the health care environment created under the federal Affordable Care Act. The Blues has operated for nearly 33 years under Public Act 350, which exempted it from taxes in return for insuring anyone regardless of pre-existing conditions. All health insurers will have that requirement starting Jan. 1.

"The old structures they were working under made it difficult for them to be as efficient and effective in the marketplace," Snyder said at the Blues' corporate headquarters in Detroit, where he signed the two-bill package into law. "The Affordable Care Act was going to create a major impediment for them to operate.

"This will allow Blue Cross to be successful."

Blues Chairman Gregory A. Sudderth called the signing "arguably the most important day in the 70-year history of this company."

Sudderth said Public Act 350 created a cumbersome process ill-suited to the new marketplace to be created under federal health reform, where health insurers will compete to sell low-cost policies on computer-based health exchanges.

"Whether it was a rate filing or introduction of a new product, we became acutely aware of the inefficiencies under the current structure," Sudderth said of the process the Blues has operated under since 1980. "Health reform will set a whole new bar of expectations and mandates. When you put those two together, a change was needed in Michigan."

The legislation was opposed by Attorney General Bill Schuette and consumer advocates who say the legislation does not protect consumers, especially senior citizens.

Schuette's calls for a third-party valuation of the Blues assets were ignored by Snyder and Republican lawmakers, who hoped to push the legislation through in time for the Blues to compete when the Michigan health exchange is required to become operation in October.

Schuette also warned that senior citizens will face increases for Medigap insurance, which picks up costs Medicare doesn't cover. Under the legislation, Medigap rates will be frozen until 2016, after which Schuette claims seniors will face what he calls the "senior cliff", a 66 percent rate increase. The Blues will provide subsidies to low-income seniors for an additional five years.

"We need a full and complete commitment to seniors, one that protects them from the looming Senior Cliff, which could cause skyrocketing Medigap rate increases for Michigan's most vulnerable," Schuette said in a press release Monday.

Asked if subscribers can expect a general rate increase as a result of the conversion, President and Chief Executive Officer Daniel Loepp said "This will not result in any changes to the existing product line."

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