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Guest commentary

Guest column: Blue Cross bills create fears over Medigap

By Mary Ablan/Area Agencies on Aging Association of Michigan

Changing Michigan’s Blue Cross Blue Shield from a charitable state-chartered organization to a nonprofit mutual insurance company will be good for consumers, according to many elected officials and newspaper editors. And the Michigan Senate did improve the legislation for this, compared with the original versions.

But more changes are needed to protect older adults and people with disabilities in our state.    

Mary Ablan is executive director of the Area Agencies on Aging Association of Michigan, “the public policy, training and advocacy office for Michigan's AAAs.”

Their access to affordable health insurance is on the line. After a four-year rate freeze expires, BCBSM would be under no obligation to sell Medicare Supplemental (Medigap) policies that cover out-of-pocket costs for people on Medicare. Blue Cross Medigap policies are unlike any other product on the market. Unlike other Medigap policies, Blue Cross policies are available to everyone on Medicare, regardless of pre-existing conditions. As just one example, they are the only supplemental policies available to people on Medicare by virtue of having end-stage renal disease. These individuals will go on Medicaid if Blue Cross’ policies aren’t available.
Some have suggested that the federal Affordable Care Act (ACA) will “level the playing field” and require other companies to provide Medigap coverage similar to Blue Cross. Wrong! ACA does not apply to Medigap. Medigap is governed by prior federal laws, which allow companies to reject bad risks, exclude pre-existing conditions and pursue other consumer-unfriendly practices.

Blue Cross Medigap policies also are unique because they are subsidized to keep the premiums affordable. The current premium of $122/month would be $194/month without this subsidy. Other Medigap policies are not subsidized. (The Senate bills require the subsidy to continue if Blue Cross decides to continue the policies.) Blue Cross Medigap policies also stand alone because any premium increases must be approved by the state, and the attorney general has the power to challenge rate increases on behalf of subscribers.

When Blue Cross requested a 36 percent rate increase for Medigap policies in 2009, Attorney General Bill Schuette challenged this request. The result? The state approved a 4 percent rate increase instead. This protection does not exist for other Medigap policies.

Medicare Advantage plans – privatized Medicare plans offered by insurance companies – have been cited as another option for seniors with Blue Cross Medigap.But Medicare Advantage plans do not provide the same level of coverage as a Medigap plan.
Consider a 78-year-old widow who needs surgery when she slips on ice and breaks her hip. She is in the hospital for five days, and a skilled nursing facility for six weeks. With a Blue Cross Legacy Medigap Policy Plan C, her out-of-pocket costs are $0. But with a Blue Cross Medicare Plus Blue PPO Vitality, a Medicare Advantage Plan, her out-of-pocket costs would be between $4,600 and $7,100. All Medicare Advantage Plans have significant deductibles and copayments that come into play when people need services.

Eliminating Blue Cross Medigap policies will result in low-income seniors and people with disabilities being forced to drop Medigap coverage and go on “bare” Medicare or Medicare Advantage with its high out-of-pocket costs. These individuals will be just one illness away from spending their limited income and assets on health care bills and winding up on Medicaid,

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

6 comments from Bridge readers.Add mine!

  1. Hardvark

    You make a lot of speculation on what other companies will do when allowed to come into this market. Competition has a way of meeting market needs. I find it amusing when you refer to BC/BS as a charitable state chartered institution. There is no charity in $1500 per month premiums for an unemployed person that wants to have health insurance. But maybe that’s why medigap is only $122 per month. I'[m sure the state could devise a plan that whould have a sliding scale for premium support to help the really needy and allow the more affluent to pay a little more. Monopolies never provide efficiencies and BC/BS has had their day in the sun.

    1. Jim

      Unfortunately commenter Hardvark has missed the point that Blue Cross was set up as a charitable entity that has used its advantages over the years to secure a dominating position in the health “insurance” marketplace. Insurers that were not able to compete with Blue Cross before will not be any more able to compete with Blue Cross after the change. In fact they will be less able to compete. The relative pittance that Blue Cross is supposed to contribute to the special fund in no way compensates for the vast advantages Blue Cross has accrued. Premiums for Blue Cross will not go down after this change.

  2. Hardvark

    I think you missed the point. Charitable means “giving from your earnings”. So if BC is giving from its earnings to the benefit of the “must insure” Michigan clients, who do you think is loosing the BC employees, stockholders, or the other BC premium payers? If you agree the other premium payers are subsidising the charitable operation and the state is providing support to BC. The BC insured tax payer is getting hosed from two sides. You sound pretty confidant, there are no other insurance companies out there with lower overhead, better fraud control, better investment returns and higher capitalization that would not want to compete in the Michigan market. If that’s the case, open the door to copetition and let the market place work.

  3. Kevin

    Jim and Hardvark,

    Both of you missed the point of this article! Hardvark – Major Medical plans like the one you mentioned have NOTHING to do with the Medigap plans that this article is referring to. The Freeze on the rate for this plan has been VERY advantageous for seniors on that plan. The problem is – once the rate freeze ends, because of the change of status, the company will be allowed to discontinue the Medigap Legacy plan (or Medigap plan C) all together – OR to put it’s premiums up where it should be (65% ratio of premium dollars spent on claims). Even with the subsidy – experts say that the plan in question should have rates upwards of $250 a month or so with all the people on that plan making claims (which are a lot since it is a guaranteed issue plan). The CEO of BCBS, himself, said that they lose money every year per person on that plan! That is why they don’t advertise it anymore…if you want it, you have to ask for it by name.

    All in all – people on that plan be warned – if you’re healthy – SWITCH OFF OF IT AS SOON AS YOU CAN! If you’re not healthy – there still may be other Medigap options available. But for those whose health will exclude them from switching plans (see note above in 3rd paragraph talking about the Affordable Care Act) – be prepared for Much higher rates, or to switch to an Advantage Plan (keep in mind, BCBS is not the only Advantage plan available in the State).

  4. Dominic ricci

    Will bcbs offer a competitive plan like a aarp has thru united health care insurance at a fare rate with low deductibles or will they not offer a supplement plan at all?

  5. Chet Brown

    If that person was on a MAPD (and had a respected professional agent) they would have been advised to purchase a hospital indemnity plan with a Skilled Nursing Rider. They would have only paid around $30 for the indemnity and $0-15 for the MAPD. This way that hospital stay and skilled nursing stay wouldn’t have cost them a cent. Also, for the remaining year, all of their Medicare covered medical costs would have been covered by the MAPD. Their savings per year is amazing compared to the costs of puchasing a BCBS Legacy and PDP plan.

    Dominic, AARP is a mktg arm or, to be more precise, a lobbying group that isn’t in the best interest for the seniors they say they represent. Their rates will skyrocket within 2 years of a persons policy activation. Better hope you don’t have any medical issues arise during that time or you will be stuck with high rates or the possible $4500-7100 max out of pocket costs of a MAPD

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