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SBAM testifies in support of BCBSM reorganization plan

September 27, 2012

Small businesses encouraged that this legislation will drive Michigan toward a level playing field for BCBSM, commercial insurers and HMOs.
SBAM told the Senate Insurance Committee today in Lansing that the organization supports Gov. Snyder’s proposal to make Blue Cross Blue Shield of Michigan (BCBSM) a nonprofit mutual. “We are encouraged that this legislation will drive Michigan toward a level playing field for BCBSM, commercial insurers and HMOs, and will streamline the outdated insurance regulatory system,” said SBAM Senior Vice President Scott Lyon.

However, SBAM expressed concern over a section of the proposal that has BCBSM contributing $1.5 billion over 18 years to a separate non-profit organization. Lyon noted that much of the money that BCBSM holds in reserve and would be available for this new non-profit has come from the premiums paid by small business owners. “With cost being the number one problem small businesses encounter daily in providing health insurance for their employees and family members, we do not want an unintended consequence of this contribution to a new nonprofit to be an increase in costs for our members and be a disincentive for job providers to offer coverage for their employees,” Lyon said.

Lyon told lawmakers that it’s important not to repeat the unfairness of the Medigap issue from late last year where small businesses were forced to subsidize seniors to the tune of about $200 million a year. “It has turned into the small business community paying additional premiums to subsidize coverage for seniors who are getting better coverage than what the small business is able to provide to their own employees. That is blatantly unfair,” said Lyon.

He cited an SBAM-commissioned study (“BCBSM Medigap Subsidies: Unintended Consequences” by the Hillsdale Policy Group’s Gary Wolfram) that found that any amount of BCBSM earned subscription income that must be used to subsidize the Medigap coverage of senior citizens cannot be used to lower the premium of the small business owner who is providing health insurance for her employees, or the person who lost his job and must seek out individual coverage, or any of the other policyholders of BCBSM.

Lyon said that small business customers deserve to have a voice in the new non-profit organization and suggests that the organization fund efforts such as measuring the cost and quality of hospital and ambulatory surgical centers across the state, financing a mandated benefit review commission that would provide legislators with an independent cost benefit analysis of the mandates that are on the books now and any future mandated benefit proposals, and other cost containment measures.

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