BCBS Medigap pricing to jump

Aug. 24--TRAVERSE CITY -- Michigan seniors should take a close look at their Medicare supplemental insurance in the next few weeks.

Rates for Blue Cross Blue Shield's Plan C Legacy Program "medigap supplement" plans have been frozen since 2011. They will go up -- by a substantial amount -- on Jan. 1.

About 250,000 Michigan residents -- including 5,024 in Antrim, Benzie, Grand Traverse, Kalkaska and Leelanau counties -- will be affected by the price increase.

BCBS covers so many Michigan seniors because it has for decades functioned as the state's only "provider of last resort," said Andrew Hetzel, vice president for corporate communications at Blue Cross Blue Shield of Michigan. That means BCBS could not refuse coverage to anyone, and by state regulation had to provide coverage at prices below the actual cost of benefits. BCBS, in exchange for providing the service, was exempted from paying state and local taxes.

"That was the structure that the state put into place under the old regulations," Hetzel said.

Passage of the federal Affordable Care Act in 2010 brought a fresh push for competition in the insurance industry, he said, including a change in mindset on Medigap coverage.

The structure of the agreement between the state and BCBS changed in 2013. Blue Cross Blue Shield was required to begin paying taxes like other insurance companies, about $100 million a year, said Hetzel. BCBS also agreed to make payments -- of up to $1.56 billion over 18 years -- into the Michigan Health Endowment Fund, an independent organization charged with supporting healthcare for children and seniors. The new agreement allows BCBS to charge market rates for its legacy medigap policies.

"The fund has decided to subsidize medigap coverage for several companies, not just Blue Cross," Hetzel said.

Seniors now can choose to buy Medicare supplemental coverage from many companies at competitive rates. Seniors have until at least Nov. 15 to change coverage plans and/or companies.

"Now it's like a level playing field," said Ryan Kashmarick, vice president of Traverse City-based Modern District Financial/American Senior Benefits.

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Blue Cross Blue Shield of Michigan has notified its members twice by mail that the price increases are on the way. Some BCBS clients are shopping for alternative coverage by getting quotes from other insurance companies that offer Medicare supplement insurance.

"I've definitely noticed a tone change in the area," Kashmarick said.

Some people unhappy with the coming BCBS rate increase have sought advice from other sources, while some have switched to coverage through other insurance companies. Kashmarick said he has met with people who wanted either lower premiums than BCBS will charge next year or different coverage than BCBS will offer.

"They weren't clients, but they are now," Kashmarick said, "It's a great feeling when you can save people that kind of money."

Nearly half of Modern District Financial's business involves Medicare supplement policies, he said, and nearly half involves financial planning. The company also sells life insurance and other products.

BCBS's new pricing will raise rates on Jan. 1 for everyone in its Legacy Program. Hetzel said BCBS will not consider health condition when setting rates -- it will use actuarial tables to determine premiums based strictly on age, gender and region of residence. Some other companies, he said, may choose to charge higher premiums for those with pre-existing conditions.

A large number of the company's Legacy Program members live in three southeast Michigan counties. The program has 30,000 members in Oakland County, 27,000 in Wayne County and 21,000 in Macomb County. BCBS's new premiums for the Legacy Program are slightly higher in those three counties than in the rest of the state.

Legacy Program membership numbers in northwest Lower Michigan are much lower: 2,462 in Grand Traverse County, 801 in Antrim, 706 in Leelanau, 531 in Kalkaska and 524 in Benzie.

In northwest Lower Michigan, a 73-year-old man who now pays $122.63 a month for Legacy Program coverage through BCBS will in January pay $236.64 a month. The new monthly premium in the region ranges from a low of $158.45 for a 65-year-old woman to a high of $278.76 for an 80-year-old man.

Each buyer must weigh premium price against coverage levels and decide what and from whom to buy. Some people will choose to stay with BCBS's Plan C Legacy Program. Others will switch to other BCBS plans -- or go elsewhere.

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