Editor:
The question of whether to reform health insurance in Michigan is suspect because it has been raised by the state's largest health insurer, Blue Cross and Blue Shield of Michigan (``Blues to ask state for level playing field for small groups,'' Feb. 4; and ``Blues to Engler: Reform insurance market, not us,'' Jan. 28). The Blues' complaint that they must insure all comers is not substantive, because that was the primary reason for their creation. I strongly suggest that the Legislature be circumspect about creating rules that benefit the Blues and their competition.
Blue Cross fails to mention that it received preferential treatment via very deep discounts from hospitals, physicians and other health care practitioners. These are discounts that other commercial insurers do not have access to. In order for commercial insurers to access competitive discounts from health care providers, they must rely on third-party PPO networks. There are no PPO networks in the state that have a network of participating health care providers as comprehensive as the network that participates with Blue Cross.
Although these PPO networks offer discounts off the standard charges of the participating health care providers, the discounts are typically not nearly as significant as those received by Blue Cross. In addition, these PPOs charge the commercial carriers an access fee that further reduces the net value of the discounts for health care services. Sometimes these PPO network access charges are rather excessive.
The largest PPO in the state of Michigan, PPOM, frequently charges as much as 10 percent of the value of the health care billings they reprice (i.e., the net discounted billing). None other than Blue Cross owns PPOM. The Blues' ownership of PPOM limits the competitiveness of all the commercial insurers.
If the state requires that all commercial insurers must play by the ``Blue rules,'' then they should have access to the same benefits provided to the Blues. This would require that the state create several new mandates for the commercial health insurance marketplace:
1. Hospital charges must be fixed at the state-mandated discount for Blue Cross.
2. All health care providers that agree to participate with Blue Cross could charge no more than the fee paid by Blue Cross for their service.
3. Special tax treatment for all commercial insurers (i.e., Blue Cross is tax-exempt); at minimum, no state premium taxes.
4. Blue Cross should be required to divest itself of ownership in PPOM. Any thoughts about leveling the playing field in the health insurance market must look at all the elements of that marketplace. The Blues already enjoy a considerable tilt in their direction. The ill-considered creation of additional rules that favor the Blues will only tend to drive out what little competition still exists.
If securing funds to offset losses is the real issue, as the Blues contend, then the sale of PPOM and the Accident Fund, Michigan's largest insurer of workers' compensation coverage, should generate more than enough funds to resolve the current crisis. I am confident that the sale of both these assets would fetch a very handsome sum.
I agree with the Blues that the playing field is not level. It has been tilted in their favor for a very long time. Any legislative action that would provide them with even more of an advantage is not good for the employers who conduct business in Michigan. Blue Cross has a virtual monopoly in both the health care insurance and workers' compensation insurance markets in Michigan. If they can't manage this near-monopoly in a manner that results in at least a break-even, then management changes are needed.
Regarding this issue, I ask that the Legislature advocate on the side of business and not on the side of the Blues.
David Silliven
Executive director
Physicians' Organization of Western Michigan Inc.
Grand Rapids
