Seniors Protected With Historic Five-Year Rate Freeze On Blue Cross Medigap Coverage

Contact: John Sellek or Joy Yearout 517-373-8060
Agency: Attorney General

December 1, 2011                                         

LANSING - Attorney General Bill Schuette today announced that Michigan seniors will be protected from rate increases on Medigap health insurance for five years under a historic agreement with Blue Cross Blue Shield of Michigan (BCBSM), the state's largest health coverage provider. 

The freeze, stretching from August 1, 2011 to July 31, 2016, comes as part of an agreement with the Attorney General's office involving BCBSM's acquisition of a stake in Pennsylvania-based Medicaid company AmeriHealth Mercy. 

"This is an example of the important responsibilities the Attorney General's office has to protect Michigan citizens and fight rising health care costs," said Schuette.  "The responsibility to fight on behalf of Michigan families, especially seniors, is a legacy Frank Kelley etched in stone for every Attorney General that comes after him."

Medigap is insurance which fills in health care cost gaps not paid by Medicare.  BCBSM is required by state law to offer Medigap at a subsidized rate as part of its non-profit, non-taxable status.  However, BCBSM is allowed to seek rate increases for the coverage.  For example, in the last five years BCBSM has received approvals for three rate increases for a total of $85.1 million (2007, 2009, 2011), based on total rate increase requests of approximately $300 million.

  The rate freeze is considered to be historic because no such freeze has occurred in recent memory.  Similar agreements in the public utility field have resulted in three-year freezes at most.

Michigan law grants the Attorney General oversight authority related to BCBSM under the Nonprofit Health Care Corporation Reform Act (MCL 550.1101 et seq.) and the Supervision of Trustees for Charitable Purposes Act (MCL 14.251 et seq.).  Under this authority, the Attorney General represents the public in administrative hearings to set BCBSM rates before the Office of Finance and Insurance Regulation (OFIR). 

As part of the agreement announced today, Schuette opted not to legally contest a transaction in which BCBSM is partnering with Pennsylvania-based Independence Blue Cross to acquire a minority interest in Medicaid company AmeriHealth Mercy, allowing the companies to expand into the national Medicaid market.  The transaction would give Michigan-based BCBSM a minority interest in AmeriHealth Mercy of approximately 38%.  AmeriHealth Mercy currently provides Medicaid managed care services in Pennsylvania, Indiana, Kentucky, South Carolina and New Jersey.

Schuette's office reviewed documentation related to the transaction, including: all documents filed with state and federal regulators; purchase agreements; independent valuation opinions; articles of organization and other documents related to the governance of the new AmeriHealth Mercy "holding company"; and BCBSM Board minutes and resolutions.    

 - 30 -