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November 19, 2012

Schuette warns of “Senior Cliff” in Blue Cross legislation

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Written by: Bruce Snook
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LANSING – Attorney General Bill Schuette Monday (November 19) testified before the House Insurance Committee, urging support for the Security Provision to protect current and future Blue Cross assets for taxpayers and the addition of stronger protections for seniors to legislation governing the proposed conversion of Blue Cross.  SB 1293 and SB 1294 would permit the conversion of Blue Cross Blue Shield of Michigan (BCBSM) from a charitable health care corporation to a non-profit mutual insurance company.

“As we consider proposals to change how Blue Cross is structured in Michigan, we must do all we can to ensure Michigan seniors don’t get shafted in the process,” said Schuette.  “Looming on the horizon is a Senior Cliff, which would cause skyrocketing Medigap rate increases for Michigan’s most vulnerable – senior citizens.  That is unacceptable.  I am confident all parties involved want to fix this problem.”

More than 200,000 Michigan seniors currently rely upon BCBSM’s Medigap coverage.  As a result of an historic agreement with the Attorney General, BCBSM’s Medigap rates were frozen for five years (Details on the agreement: http://1.usa.gov/VaqbEH).  However, once that agreement expires in August 2016, the seniors currently protected by it could face what Schuette called the “Senior Cliff”: an immediate, 66% rate increase for most seniors covered by BCBSM Medigap policies.  Schuette also noted his concern that the legislation permits BCBSM to halt its Medigap policies altogether, leaving seniors on their own to find new coverage, which would likely come at an increased cost and provide fewer benefits than the current BCBSM policies.  The proposed $15 million annual allocation by a newly-formed foundation would be insufficient to replace the current $180 million annual subsidy for Michigan seniors, Schuette added.

“This legislation is moving in the right direction, but broader, more long-term protections for Michigan’s most vulnerable are still required.”

Security Provision Protects Taxpayer Assets

Schuette urged support for the Security Provision included in legislation approved by the Senate, the People of Michigan will continue to hold an interest in the entire future value of BCBSM.  The Security Provision ensures that the People of Michigan will be the sole beneficiaries of any proceeds resulting from any potential future dissolution, conversion, merger or sale of BCBSM.  Schuette explained that the Security Provision would make BCBSM unique from other mutual insurers by safeguarding the People of Michigan against the negative outcomes that occurred in states like Virginia and Georgia, where the subsequent sales of those states’ Blue Cross plans did not include a Security Provision to safeguard taxpayers’ assets.

“Trust but Verify”

“The strong Security Provision added in the Senate will preserve Blue Cross Blue Shield’s current and future assets for the People of Michigan,” said Schuette.  “This formal mechanism to ‘trust but verify’ ensures that the People’s interest is protected for the future.”

Source:  News release from Attorney General Bill Schuette


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