Health insurance bills spark fight Sofia Kosmetatos / The Detroit News

Battle Raging A battle is raging in Lansing over proposed legislation that would set new rules for insurers selling individual policies -- a small but fast- growing market in Michigan as employers drop group coverage and many displaced auto workers seek health coverage on their own. The package of four bills under debate is designed to make individual coverage more available and affordable. It requires health insurers to pay into a pool to cover the health expenses of people who can't afford insurance, changes how premium rates are determined by all insurers and would change how the state oversees individual insurers, including eliminating the ability of consumers to challenge rate requests before they take effect. Backing the bills is Blue Cross Blue Shield of Michigan, the state's largest insurer, which says the reforms will help stem huge losses it bears from individual policies, will protect consumers from huge rate hikes by other commercial carriers, and ultimately will help the Blues continue its nonprofit mission to insure people who can't get health coverage elsewhere

What the Bills Would Do Create a guaranteed access health plan administered by Blue Cross that would insure people who otherwise could not get insurance because of health problems. Health insurers would have to pay into a pool to cover these expenses. Set rate bands so that premiums could fluctuate only up to 80% above or below an average premium, and limit the amount that all insurers could raise rates at renewal. Allow all insurers, including Blue Cross, to set initial rates depending on medical condition, age and geography. Extend the period for which the Blues and HMOs could wait to cover preexisting conditions up to 12 months from 6 months. Take away attorney general oversight and the ability of people to challenge proposed insurance rate hikes. Let a subsidiary of Blue Cross, like the Accident Fund, which sells workers compensation, sell insurance other than health.

Who opposes it? Opposing the bills are a roster of political, labor, consumer and business heavy-hitters: Michigan Attorney General Mike Cox, the United Auto Workers, the AARP, Consumer's Union and private insurance carriers such as Aetna and multiple health maintenance organizations. Since the 1990s, states across the country have been grappling with how to regulate health insurance for individuals. It's becoming a bigger issue as the number of workers who don't get health coverage through their employers grows each year. "The expectation is that employers are going to continue dropping coverage or offer only subsidies to individuals," said Dean Smith, a professor of health management and policy at the University of Michigan.

Policy Reform Overdue? Right now in Michigan, 6% of people who have insurance buy their own policies. That number is expected to grow to anywhere from 15% to 20% in the next five to 10 years, according to the insurer. Individual insurers beyond the Blues and HMOs are regulated very little in Michigan. Such companies guarantee renewal of plans and are required to have a loss ratio of 55%, meaning they must spend at least 55 cents of every premium dollar they collect on claims. But there is no regulation of premium increases, and insurers can deny coverage or charge more for coverage depending on a person's medical condition and age, among other factors.

Policy Reform Overdue? The Blues, the beneficiary of an annual state tax break ($82 million in 2007) as Michigan's insurer of last resort, is regulated the most. It is required to provide insurance for anyone who requests it. Both the Office of Financial and Insurance Services and attorney general's office have oversight authority, and insurance services office must approve any requested rate increases. And age or pre- existing medical conditions can not factor into most Blues rates. Because it can't deny anyone coverage, the Blues says pool of individually insured people is sicker than other insurers', and for every $1 in premiums paid, the insurer pays out an average $1.27 in claims, resulting in losses of $145 million in 2007 in that market. The insurer covers about 36% of individually insured in Michigan, or 132,000.

Economics In US, for insurance, state regulations are important in looking at health insurance. Often, if there are state regulations, federal regulations do not apply. Health insurance, by its very nature is redistributive, particularly in providing it to people who could not afford it. Others (who can afford) must pay for it.

Uninsured Economics What are effects of regulations on suppliers? Suppose insurers are mandated to sell to everyone. Must they be subsidized? Number Insured Price of insurance Demand Supply P* I* + costs +benefits