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Blue Cross Blue Shield of Michigan Sets Lowest Average Premium Rate Increase in 10 Years for Small Group Customers Renewing in Fall 2005

Posted on: Wednesday, 13 July 2005, 09:01 CDT

DETROIT, July 13 /PRNewswire/ -- In a move that will help small businesses throughout Michigan better afford the cost of health insurance, Blue Cross Blue Shield of Michigan said it will hold its statewide average premium increase to just 4 percent for small groups (under 100 employees) that renew coverage between October 1, 2005 and December 31, 2005 in its PPO and Traditional fee-for-service products.

The Blues' lowest rate of premium increase in 10 years is part of a continuing effort by the company to reinvest its reserves to moderate the price of health insurance for its customers.

"We are reinvesting reserve dollars to lower premium increases for our group customers for the second straight year," said Paul Austin, Blues senior vice president for Michigan Sales and Services. "This translates into more affordable health care for the 60,000 small groups that purchase coverage from the Michigan Blues."

About 40 percent of employees in Michigan's small business market have the Michigan Blues as their carrier.

The Blues' 4 percent average premium increase is well below the 12 to 13 percent underlying cost trend increase for medical and drug services. Austin said the Blues want to price below cost trend because the company had a strong financial year, has healthy reserves, and can afford to price its products more aggressively.

"We owe it to our customers to keep the cost of their health care as affordable as we can," Austin said. "Our financial strength is good for our customers when we can use it to their advantage."

In addition to healthy reserves and more favorable medical cost trends, the Michigan Blues say another key factor helping stabilize the market was the Small Employer Health Market Reform Act, which was signed into law by Gov. Jennifer Granholm in 2003 and took effect in 2004. The legislation reformed the insurance market for Michigan groups with fewer than 51 employees and is being phased in over three years beginning in 2004.

The legislation limits premium adjustments within prescribed rate bands for all insurance carriers. It also allows carriers to require that a certain percentage of a group's members enroll with an insurance company, which helps ensure there is a balanced pool of the healthy and sick to spread the risk. The Blues previously were the only insurer prevented from using this eligibility requirement. It also enables insurance carriers in Michigan to apply age factors in determining rates. Previously, the Michigan Blues were the only carrier prohibited from applying age factors.

The law also reaffirmed the Michigan Blues as a nonprofit company. The company serves as insurer of last resort - the only insurance carrier in Michigan required to offer coverage year-round to individuals who purchase their own health coverage without their rates being based on their health status. Commercial carriers that compete with the Blues can continue to use health status in determining premium rates for individuals, but rate adjustments are limited by the new rating bands.

Austin also said the Blues have embarked on a significant multi-year investment to improve the company's ability to serve customers, members and medical providers.

"Our goal is to simplify customer and provider interactions with the Blues by making our claims and communications processes much more streamlined and efficient including better use of the Web," Austin said. "This is another way we are reinvesting our reserves to improve our service to customers, physicians, hospitals and members while controlling administrative costs." He said recent examples include a new online health risk assessment for members and a Web-enabled membership and coverage verification system for physicians called web-DENIS.

Blue Cross Blue Shield of Michigan, a nonprofit corporation, provides or administers health care benefits to just over 4.7 million members through a variety of plans: Traditional Blue Cross Blue Shield, Blue Preferred, Community Blue and Healthy Blue PPOs, Blue Choice Point of Service, Blue Care Network HMO, and Blue HSA(SM) plans compatible with health savings accounts. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. For more company information, visit http://www.bcbsm.com/.

Blue Cross Blue Shield of Michigan

CONTACT: Helen Stojic of Blue Cross Blue Shield of Michigan,+1-313-225-8113

Web site: http://www.bcbsm.com/

Source: PRNewswire

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