Long-awaited legislation to reform Michigan's insurance code is expected to be introduced within the next two weeks by Rep. Tom Leonard (R-Dewitt), chairman of the state insurance committee.
Ever since Detroit-based Blue Cross Blue Shield of Michigan won state approval in 2013 to convert into a nonprofit mutual health insurer from its 33-year run as the state's insurer of last resort, competing health insurers have been expecting the state to heed their calls to update and modernize the state's 60-year-old insurance code.
"We just want a level playing field," said Rick Murdock, executive director of 17-member Michigan Association of Health Plans.
In 2012, during the debate over Blue Cross conversion to a mutual, Murdock said without reforming the state insurance code, Blue Cross would only solidify its 70 percent-plus market dominance.
"These practical changes would allow health plans to bring products to market more quickly" and comply with Gov. Rick Snyder's call to streamline state government, said Dominick Pallone, MAHP's deputy director.
Leonard was unavailable for comment last week. The insurance code changes would affect chapters 34 to 37, which govern disability insurance policies, HMOs, group and blanket disability insurance and small group health coverage, respectively.
Pallone said one major code change would allow HMOs to provide administrative services-only products to business customers through the HMO organization.
Current insurance code requires HMOs to set up separate subsidiaries to sell contracts to companies that wish to self-insure.
Murdock said the change would reduce costs and increase efficiency for the insurers, and allow employers to smoothly shift to a self-insured model within the same insurer if they wish.
Several HMOs already have set up separate companies, including Priority Health and Health Alliance Plan.
Another code change would grant the state Department of Insurance and Financial Services flexibility to approve product changes unless expressly prohibited under the code.
"This is a modernization approach. We'd like wellness plans to incentivize behaviors to encourage people to get healthier," Pallone said.
While Murdock said discussions have been held between stakeholder groups, including Blue Cross and auto insurers, only one change — time needed to complete rate approvals — has generated any controversy.
Pallone said MAHP wants the maximum time for DIFS to approve rates and product filings to be set at 60 days, which is what it is now. DIFS wants to extend that time to 90 days, he said.
"The insurance department says they need more time because all insurers submit information (for the insurance exchange) the first of the year" and the department is overloaded with work, Pallone said. "There may be a conflict there."
Andrea Miller, DIFS' public information officer, said negotiations with MAHP have been productive. "We will continue to discuss our need for additional approval time and hope we can come to an agreement on that as well," she said.
Other proposed changes to the insurance code include the following:
- Allow insurers to submit documents exclusively through electronic communication. Codes now require electronic and hard copies to the insurance department.
- Create a clear definition of a health insurer, which includes health maintenance organizations, or HMOs. This would avoid confusion between HMOs and health insurers, which also offer PPO products.
- Eliminate outdated requirements for insurers and HMOs to offer indemnity policies.
- Clarify that insurance mandates only apply to health insurance, not auto, life, property and casualty insurers.
- Add provisions that address problems when policyholders sign up for coverage, use the policies, but don't pay premiums.
- Enable Michigan to use its own external consumer complaint resolution process and allow 60 days for consumers to appeal decisions from insurers that could include coverage or referral denials.
- Centralize all codes regulating health insurance into chapter 35.
