Compliance July 30, 2003

Michigan Governor Signs Small Business Health Care Bill

July 30, 2003 (PLANSPONSOR.com) - Michigan Governor Jennifer Granholm has inked the last of five bills intended to reform the small business health insurance market through stabilizing costs and prohibiting insurance companies from "cherry picking" only the healthiest small business workers to insure.
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>The five bills – SB 234, SB 238, SB 460, HB 4280, HB 4281 – apply to companies with fewer than 50 employees and seek to offer more flexibility to these firms through rate bans, regulated rates and ceilings on premiums. “By making health care coverage costs easier to predict and giving small businesses more flexibility to shop around for the best coverage and premiums, we are helping to ensure that small business will continue to flourish in Michigan,” said Granholm, according to Washington-based legal publisher BNA.

Paramount among these reforms are limits on how high insurers can raise premiums when employees at their covered companies become sick and the elimination of “cherry picking” only healthy participants.   Previously, Blue Cross Blue Shield of Michigan (BCBSM) would be required to cover workers regardless of age or health status, creating a glut for BCBSM when other insurers began dumping high-risk workers onto its rolls to reduce their own risk.   This put the nonprofit BCBSM, which already insures nearly half the state’s population, under a greater financial burden.  

Yet under the new laws, a certain percentage of a group’s members must enroll to create a pool of healthy and sick individuals to spread the risk and reduce “cherry picking.”

>Additionally, the quintet of health-care bills includes reforms such as:

  • permitting insurance carriers in the small business market to create 10 geographic areas for rate adjustment
  • requiring BCBSM to cover sole proprietors and allow other carriers to cover sole proprietors if they wish (new rules will cover the sole proprietor category)
  • requiring carriers to cover any purchaser with renewable insurance, unless the carrier leaves the area
  • requiring the state insurance commissioner to determine whether reasonable competition exists in the small group market.

However, opponents of the bill – albeit few in number – argued that the legislation would simply provide Blue Cross with an unneeded advantage in the marketplace, on top of its tax-exempt status as a nonprofit corporation.

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