2008 Article: “Blue Cross Pursues Health Insurance Market Domination”

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Note: This article was posted in 2008 on a previous version of the “Students for a Free Economy” blog that is no longer live. The legislation it describes is moribund for now, but “rent-seeking” entitites never stop seeking political favors, so it could return at any time.

Legislation has passed the Michigan House that is certain to reduce competition and choice in the growing individual health insurance market in Michigan, reducing innovation and raising prices. 2007 House Bills 5282-5285 would let BCBS have it’s cake and eat it too with regard to retaining its tax-exempt status, but no longer having to carry the load as the state’s insurer of last resort. Instead, that burden would be off-loaded to for-profit insurers in the form of fees or assessments over which they would have essentially no control. In return Blue Cross would give up – well, it wouldn’t give up anything at all!

Here’s the context: In general, there are two ways for a state to make private insurance available to people who are uninsurable due to pre-existing conditions. Many states have high-risk pools, which is what the current legislation would create. Under that system all insurers pay a fee or assessment that is used to subsidize price-controlled policies for those denied coverage elsewhere. The other method is to establish a non-profit, tax exempt entity as the insurer of last resort, which is what Michigan has in the form of Blue Cross. It’s an either/or policy, but this legislation would establish both, with Blue Cross in the catbird seat.

 The legislation would also impose price controls in the form of “rate bands” on individual health insurance policies, would repeal some BCBS oversight provisions from current law, and would allow the for-profit insurance companies Blue Cross has acquired to enter the health insurance market – something now prohibited. It whooshed through the House in near record fashion, with just 13 days passing between introduction and an 89-17 final passage vote.

Lansing insiders joke that given its outsized political influence, legislators might as well light up the Capitol dome with the BCBS logo at night. The nonprofit insurer’s PAC has contributed to literally every single state representative and senator now serving in the Michigan Legislature. In the last election cycle it was the 13th largest campaign giver; in the 2003-2004 cycle in which the pro-BCBS group health insurance regulations passed it was the 7th largest, contributing $920,421 to candidates.

Blue Cross controls as much as 70 percent of the Michigan health insurance market (it says the number is closer to 60 percent). Reportedly no other state “Blue” dominates its state’s insurance market to the extent that Blue Cross Blue Shield of Michigan does the Great Lake state’s.

Incidentally the BCBSM board contains a who’s who of Michigan union bosses. Its dominance in the state health insurance market – directly related to its dominance in the political arena – is perhaps another negative effect of what I have called “the curse of GM”: The hangover of state economy that heavily reliant on a single industry (car-making), and that industry’s too-cozy past relations with its unions.

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13 Responses to “2008 Article: “Blue Cross Pursues Health Insurance Market Domination””

  1. Maxine Says:

    There are many parties are taking advantage from this health care program, aren’t they?

  2. Hannah Says:

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  3. Preston Mcnease Says:

    Guys… guys, our US democracy does not seem to seems to function so well lately. Sometimes i wonder if socialist or communist countries are laughing at us. We start to become like a third world country lately !

  4. agus Says:

    Good article and thanks for your information.
    Thanks

  5. Jina Fenty Says:

    Fine, this is a good start however i’ll have to explore that a touch more. Will let you know what else there is.

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