Don't Discriminate Among Michigan Health Insurers

During his six terms in the U.S. Senate, Michigan Democrat Carl Levin has repeatedly challenged "big business special interests." Yet, in voting for the comprehensive health overhaul bill last month, Levin made a special deal with the Senate leadership to exempt one special big business interest — Blue Cross Blue Shield of Michigan — from paying any portion of a new health insurance premium tax the Senate bill would create.

Because the Blues would be exempt from the new tax, other health insurers in Michigan and elsewhere would have to pick up a bigger share of the bill, estimated to cost $70 billion nationwide over 10 years.

The insurers who didn't get Levin's sweet deal are at a decided disadvantage. They will have to pay the tax, which certainly will be passed on to thousands of individuals and small businesses in the form of higher premiums, making their policies less attractive to consumers. The nonpartisan Congressional Budget Office agrees that the health insurance premium tax will quickly show up as higher insurance premiums.

So, ironically, rather than creating a more competitive marketplace — long the dream of liberals — the exemption will discourage competition and choice among health plans in Michigan.

Michiganians who are enrolled in other health plans that must pay the new tax will be subsidizing those who have coverage with Blue Cross Blue Shield who don't have to pay.

While about 1.5 million Michigan residents purchase group coverage from Blue Cross Blue Shield of Michigan, nearly as many — about 1.3 million residents — purchase group coverage from one of 23 other health insurers in the state.

The Blues have even greater dominance in the market for individual health insurance, with an 88 percent market share.

Adding a premium tax to the cost of health insurance could become a competition-killer for these other companies. They may have better service or broader networks of doctors, but they will have a built-in disadvantage because they must pay the new premium tax, leading to higher premium costs than the Blues.

The stated goal of President Barack Obama and Democratic leaders in Congress is for health reform to lower health costs and bring more competition into the health insurance industry — especially in states like Michigan, where a single health plan dominates the market.

Exempting the state's largest health plan from the pending health insurance premium tax while everyone else is forced to pay makes a mockery of their call for vigorous competition.

Does anyone really believe that greater dominance by the Blues actually will spur competition and lower prices?

It should be noted that the premium tax on health insurance policies begins in 2011 — well before coverage reforms and premium subsidies go into effect in 2014 — which means that insurers and therefore policy holders will pay the tax three years before they receive any benefits.

That's an unfair burden that no Michiganian should be asked to bear — especially when others are getting special treatment.

Levin's discriminatory treatment of health insurers in the state should be jettisoned along with the many other special back-room deals concocted to pass the Senate health reform bill. Hopefully, Congress will hear that message loud and clear and eliminate the tax to restore a level playing field for all health insurers and institute genuine competition that would lead to lower insurance costs for all Michigan residents.

Published in The Detroit News, January 13, 2010.

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During his six terms in the U.S. Senate, Michigan Democrat Carl Levin has repeatedly challenged "big business special interests." Yet, in voting for the comprehensive health overhaul bill last month, Levin made a special deal with the Senate leadership to exempt one special big business interest — Blue Cross Blue Shield of Michigan — from paying any portion of a new health insurance premium tax the Senate bill would create.

Because the Blues would be exempt from the new tax, other health insurers in Michigan and elsewhere would have to pick up a bigger share of the bill, estimated to cost $70 billion nationwide over 10 years.

The insurers who didn't get Levin's sweet deal are at a decided disadvantage. They will have to pay the tax, which certainly will be passed on to thousands of individuals and small businesses in the form of higher premiums, making their policies less attractive to consumers. The nonpartisan Congressional Budget Office agrees that the health insurance premium tax will quickly show up as higher insurance premiums.

So, ironically, rather than creating a more competitive marketplace — long the dream of liberals — the exemption will discourage competition and choice among health plans in Michigan.

Michiganians who are enrolled in other health plans that must pay the new tax will be subsidizing those who have coverage with Blue Cross Blue Shield who don't have to pay.

While about 1.5 million Michigan residents purchase group coverage from Blue Cross Blue Shield of Michigan, nearly as many — about 1.3 million residents — purchase group coverage from one of 23 other health insurers in the state.

The Blues have even greater dominance in the market for individual health insurance, with an 88 percent market share.

Adding a premium tax to the cost of health insurance could become a competition-killer for these other companies. They may have better service or broader networks of doctors, but they will have a built-in disadvantage because they must pay the new premium tax, leading to higher premium costs than the Blues.

The stated goal of President Barack Obama and Democratic leaders in Congress is for health reform to lower health costs and bring more competition into the health insurance industry — especially in states like Michigan, where a single health plan dominates the market.

Exempting the state's largest health plan from the pending health insurance premium tax while everyone else is forced to pay makes a mockery of their call for vigorous competition.

Does anyone really believe that greater dominance by the Blues actually will spur competition and lower prices?

It should be noted that the premium tax on health insurance policies begins in 2011 — well before coverage reforms and premium subsidies go into effect in 2014 — which means that insurers and therefore policy holders will pay the tax three years before they receive any benefits.

That's an unfair burden that no Michiganian should be asked to bear — especially when others are getting special treatment.

Levin's discriminatory treatment of health insurers in the state should be jettisoned along with the many other special back-room deals concocted to pass the Senate health reform bill. Hopefully, Congress will hear that message loud and clear and eliminate the tax to restore a level playing field for all health insurers and institute genuine competition that would lead to lower insurance costs for all Michigan residents.

Published in The Detroit News, January 13, 2010.

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About the author