6 November 2012

Midwest Edition
November 15-16
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Blues Conversion Hits A Few Bumps
Concerns Raised About Valuation, Competition
The legislation that would convert Blue Cross Blue Shield of Michigan into a mutual insurer from its current role as the state’s insurer of last resort is slowly making its way through the give-and-take of compromise, with some moderate resistance from consumer advocates and its market competitors. The pending legislation would alter the 32-yearold Public Act 350, which allows the Blues to avoid paying state and local taxes in exchange for taking on beneciaries who would otherwise be uninsurable. Michigan is one of the last states to operate in this way – most other states have high-risk pools to insure these individuals. With guarantee issue part of the Affordable Care Act, there is no longer a need for this kind of regulation of the Blues, ofcials say. The bill – based primarily on proposals oated by Gov. Rick Snyder earlier this year – would allow the Blues to become a mutual insurer owned by its policyholders while retaining its nonprot status. However, it would be compelled to pay state taxes of about $100 million annually and contribute $1.5 billion over 18 years to a nonprot funding healthier lifestyles and improve public health. “The legislation acknowledges that the ACA is changing the industry but the purpose goes beyond the ACA,” said Andy Hetzel, vice president for corporate communications for the Blues. “Michigan has a broken system for health insurers. We have a trifurcated system where commercial insurers, HMOs and others all play by different rules.” The legislation has moved through the Senate and a hearing is scheduled in the House when legislators return shortly after this week’s election. Snyder has said he wants the legislation on his desk to sign by the end of the year. Hetzel said there are two core principles for BCBSMI under this proposal. The rst is the creation of a “fair and balanced regulatory system in Michigan.” The second is that the company is able to retain its nonprot status.
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Blues (Continued from Page One)
“We don’t want to be a for-prot company co-owned by stockholders,” he said. Hetzel said the company’s main complaint is its inability to expediently set rates in the individual market. The organization currently has to submit rate requests for the individual market to the insurance commissioner, where they are subject to a public hearing and review. The process can take up to 18 months, and is generally slower for the Blues than for its competitors. “The Blues’ rate-setting process is a huge competitive disadvantage,” Hetzel said. “It is cumbersome to set pricing effectively and efciently.” Hetzel said the legislation is not contentious and received overwhelming bipartisan support in the Senate. But there are a handful of dissenters outside of the Legislature including AARP, the Center for Insurance Research, a nonprot public policy and advocacy association, and the Michigan Association of Health Plans. Bill Schuette, the state’s attorney general, has spoken publicly about the need for an independent consulting rm to analyze the assets and value of the company before the legislation is signed by Snyder and enacted. This step, which traditionally occurs when a not-for-prot company converts to a for-prot or undergoes a radical shift to another corporate form, is not required under this legislation. Schuette may sue if the legislation is passed as-is and he feels it is does not presetve the interests of the state’s residents. Brendan Bridgeland, director for the Cambridge, Mass.-based Center for Insurance Research, agreed with the need for an impartial evaluation of the company. He estimates BCBSMI’s market value could be more than double its $3.2 billion book value. “You only get a chance to do this once … and if conversions happen and payment transfer weren’t made or assets weren’t valued, if you try to recapture them later through

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In Brief
Saint Anthony Hospital Challenges Illinois Regulators
Chicago-based Saint Anthony Hospital is butting heads with the Illinois Department of Healthcare and Family Services, claiming the agency is unlawfully holding back supplemental Medicaid payments. According to hospital officials, Saint Anthony has had its supplemental payments withheld because it lacked a contract with a integrated care program contractor. The requirement was part of a new law intended to toughen up Medicaid guidelines passed by the state Legislature earlier in the year. However, hospital officials claim that its current contracts with health plans suffice for the integrated care program contractor suffices and the agency is misinterpreting the regulations. “The democratic leadership in the State of Illinois has suggested that it understands the plight of those challenged in these tough economic times, and the importance of providing fair access to health care for all," said Saint Anthony Chief Executive Officer Guy A. Medaglia. “Yet the actions by the HFS speak to the contrary, prioritizing state budget goals over healthcare for its citizens by enacting and enforcing unfair and punitive policies targeting safetynet hospitals.”

litigation, you only got pennies on the dollar.,” he said. “They need to value it right now.” MAHP called a meeting last week with the media detailing their opposition to the legislation. Rick Murdock, the group’s executive director, said it has been advocating the Blues make the transition for a number of years. His concern, however, is to truly make it a level playing eld. “It may sound equal, but it isn’t,” said Joe Aoun, an attorney representing Aetna at the MAHP media session. “They say want to be regulated like everyone else and it sounds good, but there should be a different regulation when someone has that large a portion of the market.”

Could Cause Medigap Issues
Mary Ablan, executive director for the Michigan Area Agencies on Aging Association, said the bills eliminate the Blues‘ status as the insurer of last resort for Medigap, the state’s Medicare supplemental insurance. Under the Patient Protection and Affordable Care Act, there are no direct regulations for this kind of insurance. So people who need it the most – the disabled elderly – may not be able to get policies from commercial insurers because they wouldn’t meet underwriting standards. “This is a lifeline for those individuals,” Ablan said. Michigan is one of the only states where Medigap is subsidized – keeping the cost of premiums well below market rates. Under the current law, an assessment of up to 1% of BCBSM’s revenues can be used to subsidize Medigap coverage – which Hetzel said covers about 210,000 beneciaries. The legislation also eliminates subsidies for

Continued on Next Page

Michigan Blues Grant More Than $1 Million To Clinics
Blue Cross Blue Shield of Michigan has awarded more than $1 million in grants to safety net clinics throughout

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Blues (Continued from Page One)
Medigap in 2016. But Hetzel said this won’t have a huge impact on the market. “Over time, people have become accustomed to subsidized Blue Cross plans but there are much better options out there,” he said. “Even at subsidized prices, almost all of our Medigap subscribers would be better off buying a Medicare Advantage Plan. Bridgeland and others don’t necessarily oppose a Blue Cross conversion, but would like to see the process slowed. The guarantee

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In Brief
the Wolverine State as part of its “Strengthening the Safety Net” program. Fifty clinics received grants of $15,000 apiece. Eight clinics also received an additional $50,000 to address gaps in the local safety net system. The larger grants were part of a competitive bidding process. “As part of our ongoing social mission, our free clinic grant program continues to play a crucial role in Michigan's healthcare system, by providing quality healthcare to the uninsured, serving as a safety net for people who need it the most,” said Lynda Rossi, BCBSM senior vice president of public affairs. One clinic that won both grants, St. Vincent de Paul in Detroit, said it would use the money to expand the dental care it providers to city residents.

issue policy of the ACA doesn’t go into effect until January 2014. Another option, he said, would be to evaluate the state’s insurance regulations to make them fairer, in lieu of converting Blue Cross. “We want a longer look and more public disclosure,” Bridgeland said. “This shouldn’t be happening behind closed doors and there has to be the opportunity for the public to provide input.” –TAMMY WORTH

Henry Ford, Beaumont To Merge
Deal is Expected to Boost Efficiencies, Cut Costs
Henry Ford Health System and Beaumont Health System have signed letters of intent to merge their organizations and create a powerhouse hospital network in the greater Detroit area. The combined organization would include 10 hospitals and 200 other sites, such as clinics and medical ofces, where patients receive care. The system would have revenues of more than $6.4 billion a year and nearly 40,000 employees. “Our shared vision is to form a new organization that will develop improved approaches to patient care that will lead the nation in quality outcomes, service, access and reliability,” said Ford Chief Executive Ofcer Nancy M. Schlichting. “It is a bold and exciting vision that will mean easier, more accessible and more integrated care for our patients.! Coming together allows us to create a ‘Pure Michigan’ community-based system that will serve as an engine of innovation and economic development.” Ofcials with both hospital systems say a merged entity would be able to provide better coordinated care, linked throughout by an electronic medical record system (both parties use the EPIC platform). It is also expected to help cut costs, although ofcials from both organizations did not discuss specics at a news conference in Detroit last week. However, Schlichting indicated that some facilities could close at an unspecic date in the future. A merged system would also allow more bargaining power in negotiating with insurers, according to observers. A larger hospital entity prevents the managed care plans from driving rates too far down,” hospital merger expert Joshua Nemzoff told Crain’s Detroit Business. Nemzoff added that he didn’t expect a dramatic amount of leverage from a merger. Although Henry Ford is bringing seven of the 10 hospitals to the deal, the merged system would be governed by a single board with equal representation from both entities. The Detroit-based Henry Ford and and Royal Oak-based Beaumont will still use their brand names, but a single new name for the system will be agreed on in the near future. The merger, pending regulatory approvals, is expected to be completed by mid-2013. The two hospitals have created a website, www.futurecareformichigan.com, to discuss the pending transaction in greater detail and answer questions from consumers and other stakeholders.
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Judge In Michigan Stays Contraception Mandate
A federal lawsuit brought by a Michigan company that sells outdoor equipment has brought a temporary stay to a requirement in that state that employers offer health plans with mandatory contraceptive coverage. U.S. District Court Judge Robert Cleland ruled that although the Weingartz Supply Co. had only a modest chance of prevailing at trial, he would defer to the religious beliefs of its owners for now. “The harm in delaying the implementation of a statute that may later be deemed constitutional must yield to the risk presented...of infringing the sincere exercise of religious beliefs,” Cleland wrote. Weingatz’s owners designed its health benefits to adhere to their Catholic faith. They claimed not providing contraceptive coverage under the mandate of the Affordable Care Act would cost the company about $280,000 a year in penalties.

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A Neurosurgeon Turns Film Auteur
His Analysis of U.S. Healthcare is Worth Watching
Vivekanand Palavali, M.D., has it all. A accident was able to dismiss the Affordable Care neurosurgeon who trained at the University of Act as damaging to the country. Chicago and practices in Flint, Mich., he is the As a matter of fact, one of the most embodiment of the American Dream, someone trenchant observations about the U.S. healthcare who has made more than good since he system came from a Swede Palavali interviewed. immigrated from India in the mid-1980s. Sweden, of course, has guaranteed access to Yet Palavali isn’t satised. Despite healthcare. making a comfortable living, he practices in “Money makes the choice for them,” she one of the most economically battered cities in said of the Americans. the U.S. The automotive As a result, Palavali industry mostly pulled out of concluded that the U.S. Flint in the 1970s, and the system is much closer to that Great Recession has caused the of a developing country such number of uninsured patients as his native India, where he treats to about double. those with money have access “I began asking myself, to decent hospitals and ‘isn’t anyone ashamed?’ everybody else is on their America is the richest, own. Palavali makes this powerful nation in the world,” poignant point by managing to he said. “It spends close to $3 nd two homeless cancer trillion a year on healthcare. victims – one in India, and Where is the money going to?” one just footsteps away from To nd out, Palavali put Harvard University. himself behind the two digital Palavali’s lm has its By cameras he owns. aws; it relies too much on the longThe end result is a documentary faded Occupy movement for too much Ron called “Bitter Pill: America & and spends too Shinkman source material, ruined streets ofmuch Healthcare In America.” time visiting the cities Given Palavali served as “Bitter such as Detroit and East St. Louis, Ill. Pill’s” director, writer, cameraman and narrator without tying them closely enough to his thesis. and is not a professional lmmaker, he But overall, “Bitter Pill” is a better effort nonetheless created a remarkably clear than another lm about healthcare created by a indictment of the U.S. healthcare system. resident of Flint: Michael Moore’s “Sicko.” That’s “Bitter Pill” is far closer to what you would see primarily because Palavali’s narrative is backed on “Frontline” than YouTube. by facts and isn’t gummed up with smugness Palavali traveled to ve countries for his and stunts such as taking a bunch of Americans research, and interviewed everyone from to Cuba for a checkup. healthcare policy experts to an exotic dancer “Bitter Pill” is playing primarily in theaters in Las Vegas named “Malibu.” She in the Flint area. More information is available at acknowledged that she entertains spinal www.bitterpilldoc.com. If you are able to track a showing of it surgeons and other physicians, compliments of down, I strongly suggest you watch it. You may the nation’s medical supply companies. That is not agree with what it has to say, but it among the reasons, Palavali concluded, that cohesively puts together many interesting facts spinal fusion supplies cost about ve times as about the unique business of U.S. healthcare much in the U.S. than anywhere else in the delivery, and presents them in an engaging and world. informative manner. He also discussed the disinformation dumped onto the American people by politicians who foment fears that any Ron Shinkman is the publisher of Payers & expansion of healthcare coverage is the Providers. equivalent of European-style socialism. Which is how an uninsured patient of Palavali’s who is on the business end of $100,000 in medical Op-ed submissions of up to 600 words are bills after breaking her neck in a roller skating welcomed. Please e-mail proposals to

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