AREA AGENCIES ON AGING ASSOCIATION OF MICHIGAN

ASSOCIATE MEMBER NEWS

Week of October 8, 2012

The Blue Cross bills will advance . . . . next week when the Senate Insurance Committee meets on Tuesday, October 16, according to statements made today by Senate Majority Leader Randy Richardville (R-Monroe). The hearing is scheduled at 3 p.m. and will take place in the Boji Tower main floor hearing room. The plan is to report SBs 1293 & 1294 out of the committee and take them directly to the Senate floor the next day, the last session day in the Senate before the November election. Media reports predict both bills will pass the Senate.

Senator Geoff Hansen (R-Hart) has already announced his intention of introducing an amendment to keep intact the Blue Cross Escheats Fund, now used to provide respite and day care services through the aging network. Senator Joe Hune (R-Hamburg) and Blue Cross Blue Shield have indicated their support for the amendment. Not known is whether the votes are sufficient in the committee to approve the amendment, whether the amendment would survive on the floor of the Senate, or whether Governor Snyder would support the amendment.

Low-income seniors’ access to affordable health care is also on the line with this legislation, which allows Blue Cross to eliminate their highly regulated and subsidized Medigap Legacy policies once they become a nonprofit mutual insurance company. An agreement with Attorney General Bill Schuette requires Legacy premiums to be frozen for the next four years, but that provision does not appear in the legislation.

So what’s the harm of allowing the Blues to eliminate Legacy? Aren’t there other Medigap policies offered by many insurance companies?

It’s true that there are many policies available. The problem is companies selling them are allowed to underwrite (reject bad risks), exclude pre-existing conditions and base premiums on rating factors including age. Blue Cross is not allowed to do any of those things with Legacy now under Public Act 350. Some have suggested that the Affordable Care Act will improve this situation so there is no need to be concerned at this point. But this argument is based on a misunderstanding about ACA.

While ACA imposes many new protections for consumers purchasing health insurance by requiring guaranteed issue, eliminating pre-existing condition exclusions, limiting rating factors and so on, these ACA protections do not apply to Medicare Supplemental policies. Medigap is governed by prior federal laws, which allow underwriting, pre-existing condition exclusions, age-rating and other consumer unfriendly provisions.

There is one limited protection for seniors only, when they first go on Medicare. For their first six months on the program, they have the right to purchase a Medigap policy from any company they choose and cannot be turned away because of poor health. But this protection goes away after six months; at that point, companies can screen and reject applicants with poor health. And that very limited protection does not exist at all for younger people who qualify for Medicare by virtue of disabilities or End-Stage Renal Disease.

The Advocacy Alert included with this edition has details on whom to contact to voice your concerns.

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AREA AGENCIES ON AGING ASSOCIATION OF MICHIGAN

ADVOCACY ALERT

October 12, 2012

BACKGROUND:

Senate Bills 1293 and 1294 would change Blue Cross Blue Shield from a state-chartered charitable nonprofit to a nonprofit mutual insurance company. The rationale is that because of new protections in the Affordable Care Act (ACA), we no longer need Blue Cross to serve as the insurer of last resort. While there are many implications to this change, aging and disability advocates are focused on three negative impacts.

The first is the elimination of a special fund that pays for respite and day care services through the aging network. This fund, called the “Blue Cross Escheats Fund,” comes from the Blues’ uncashed checks which revert to the state treasury. State laws passed in 1990 (Public Acts 171 & 172) earmark those funds for caregiver support services to keep seniors in their own homes and out of institutions. In FY 2013, this fund will get over $5.5 million. The fund will be eliminated if SBs 1293 and 1294 are adopted.

The second is the impact on the most accessible and affordable Medicare Supplemental (Medigap) policies offered in Michigan – Blue Cross “Legacy” policies. No other Medigap policies or Medicare Advantage plans are as good as Blue Cross Legacy. Passage of SBs 1293 and 1294 would allow Blue Cross to eliminate these policies in the future, although the Blues have promised to maintain them for the next four years under the rate freeze agreement negotiated by Attorney General Bill Schuette. However, the Legacy rate freeze is not included in the bills as they were introduced.

It is important to note that none of the new protections in the Affordable Care Act apply to Medigap policies – insurance companies can still turn away bad risks and impose pre-existing condition exclusions.

The Blues Legacy policies are community-rated, do not have pre-existing condition exclusions, and any premium increases are subject to review and challenge by the Attorney General. No other Medigap policy meets this gold standard. While insurance companies can reject applicants after an initial 6-month protection period expires, Blue Cross must always accept all applicants, regardless of health status.

Medicare Advantage plans are also available to Medicare beneficiaries as an option, but Advantage plans have several drawbacks: 1) Advantage plans require seniors to use their own limited network of providers and physicians; 2) seniors who travel or stay temporarily in other states cannot access health care in other locations except for life or death emergencies; 3) while premiums are usually lower for Advantage, seniors who need health care face sizable deductibles and copays that don’t exist with Legacy policies.

Thirdly, the elimination of Blue Cross Legacy Medigap has special significance for younger people who are on Medicare because of serious disabilities. When seniors first become eligible for Medicare, they have a six-month protection period in which all insurance companies must sell them a Medigap policy. This is required by federal law. However, federal law does not offer this same protection to younger people with disabilities when they become eligible for Medicare. That means that people with disabilities on Medicare are especially vulnerable, and need access to the community-rated and affordable Medigap Legacy policies offered only by Blue Cross. As one example – younger people eligible for Medicare because of End-Stage Renal Disease can only access coverage through Blue Cross.

WHAT YOU CAN DO:

Contact members of the Senate Insurance Committees and request amendments to the Blue Cross bills that would 1) earmark the Blue Cross Escheats fund for senior programs, and 2) maintain current protections for Blue Cross Legacy Medigap policies.

Senate Insurance Committee

Chair: Joe Hune (R-Hamburg)(517) 373-2420

Jim Marleau (R-Lake Orion)(517) 373-2417

Jack Brandenburg (Harrison Twp)(866) 229-4211

Geoff Hansen (R-Hart)(866) 305-2134

Dave Robertson (R-Grand Blanc)(517) 373-1636

Virgil Smith (D-Detroit)(517) 373-7918

Steve Bieda (D-Warren)(517) 373-8360

Here are some talking points:

  • Blue Cross Escheats are earmarked for caregiver supports that keep seniors in their own homes and out of costly institutions. Cutting these funds would terminate services to thousands of older adults & caregivers across the state.
  • The protections in the Affordable Care Act do not apply to Medigap policies – insurance companies can still turn away bad risks and impose pre-existing conditions exclusions.
  • Blue Cross Legacy Medigap policies are the most accessible and affordable policies in the state and must be maintained by keeping current statutory protections in place. If Legacy policies are discontinued, some low-income seniors will be forced to drop coverage altogether, relying on bare Medicare with its high out-of-pocket costs.
  • Younger people with disabilities going on Medicare have no legal protections in purchasing Medigap and rely on Blue Cross Legacy policies to supplement Medicare.