Health Plans for One: BC/BS losses make coverage complex, expensive

TRAVERSE CITY – These days when someone knocks on insurance agent Mark Irwin's door, chances are good that they've come looking for an individual health insurance policy. As job losses mount, insurance agents throughout the area report a dramatic rise in both inquiries and purchases of individual health insurance plans; for those with Blue Cross Blue Shield that could get even more expensive.

"Over the course of the last year we've had a significant increase in individuals coming in, seeking their own health care plans because their employer is no longer providing it or because they've lost their jobs," said Irwin, an agent with the Elk Rapids office of Fischer Insurance. "I'd be shocked if you didn't have every agent in the state saying that."

One of the main carriers of individual health care plans here is Blue Cross Blue Shield of Michigan, a not-for-profit insurance company chartered by the State in 1939. The company receives tax advantages in exchange for having its rates regulated and by agreeing never to deny coverage to anyone, regardless of health status. For many with health problems, this has made Blue Cross Blue Shield the insurer of last resort, and, according to the company, has precipitated a massive loss of as much as $1 billion in the next two years.

On Jan. 16, company president Daniel Loepp announced that the loss was directly related to individual health care plans, quipping to the Detroit Free Press that, "high cost cases you can dump on the Blues." A situation that will cause layoffs and rate hikes – 400 staffers will be cut before the end of March, an additional 600 by the end of the year, and approval of a rate increase for individual plans of as much as 55 percent will be sought.

"They are the fall-back measure," said agent/broker Dave Burlew, with Michigan Health Plans and offices in Traverse City and Thompsonville. "People may find their individual plan is not equal to the coverage they had with an employer in terms of office calls and prescription coverage, but they are good policies. I have Blue Cross myself."

State Farm Agent Scott Tilford of Traverse City said the clients he sees who request rate quotes for individual plans have not always lost their jobs, but often work for an employer who is scaling back benefits. The worst thing someone in this circumstance can do, he says, is ignore the issue and just hope for the best.

"You wouldn't believe the number of people who don't have health insurance, but can go out and buy a new snowmobile or a new boat. These are people I care about and it concerns me greatly."

Cautionary tales from agents are frequent. One client purchased a high-deductible individual policy and less than a year later was hospitalized with a serious Staph infection. Total cost: $250,000; out-of-pocket cost: $3,000. Another lost their job and their health coverage, fell off a roof while removing snow, and ended up liquidating their IRA just to pay their medical bills.

Loyal customers and guaranteed coverage has made the company a fixture in Michigan for almost seventy years, with 418,000 residents having some form of individual health insurance from Blue Cross Blue Shield. These plans range widely in price from less than $100 a month for Medigap premiums to more than $500 a month for some individual plans. The soon-to-be requested rate hike comes after a battle in the legislature over insurance reform, where Attorney General Mike Cox and many citizens groups opposed Blue Cross Blue Shield-backed bills to reform individual health care plans.

Though some thought HSAs, or Health Savings Accounts, would share the burden of people self-employed or uninsured by their employers, for a variety of reasons including up-front costs, price, coverage, and complexity, these have yet to catch on with either consumers or employers.

"When they first came out, we thought it was going to be the next big thing, and we worked very hard to learn everything we could about them, but the rates just never were there to make it attractive to people," said Irwin.

Any rate hikes in Blue Cross Blue Shield premiums much first be approved by the Michigan Office of Financial Insurance and Regulation. BN