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Kuipers
Presses MESSA On Pooling
MIRS, November 29, 2005
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Sen. Wayne
Kuipers (R-Holland) drilled Michigan Education Special Services
Association (MESSA) representatives during a hearing about
education employee health care pooling, basically telling them
that their logic in regards to why pools shouldn't be opened to
all school districts was seriously flawed.
MESSA is opposed to SB 0895 and SB 0896, sponsored by Sen.
Shirley Johnson (R-Troy); and SB 0897 and SB 0898, sponsored by
Kuipers, because the group claims it would open the market up to
cherry picking and it doesn't protect school districts against
serious loss. Also, depending on the day, the group admits it
will affect MESSA's market share (See "Pooled Education Health
Care Back Again," 11/22/05).
"If the bills are passed and signed into law, would your
organization be able to continue marketing and providing
services across the state?" Kuipers asked.
"It would be severely hampered," said Gary FRALICK, of MESSA.
Not satisfied with the answer, Kuipers asked a new question and
restructured it to address cherry picking, an issue that seemed
to form the bulk of MESSA's opposition at the beginning of the
testimony.
MESSA officials argue that opening up information about health
care data claims would pull healthy people out of pools and
drive up costs. But proponents of the bills, including the
American Federation of Teachers (AFT), say it would only help
pool members find cheaper health care.
"If you knew nothing (not having claims data) about 500-1,000
new people would you underwrite them?" Kuipers asked.
"Absolutely," Fralick said.
"That's not a very smart business decision," Kuipers responded.
"If your organization is as good as you say it is, why are you
afraid to be open to competition?"
The MESSA response was that school districts can already compare
200 insurance options and that it isn't concerned with market
share because it's a membership organization.
MESSA was originally founded to provide insurance for members of
the Michigan Education Association members (MEA).
"What is the market share of the MEA?"
MESSA's response: 58 percent.
"You're not concerned with market share yet you knew it like
that?" Kuipers asked, snapping his fingers.
Kuipers seemed to be more open to MESSA's criticisms that open
claims data isn't necessary and could be invasive and leave
employees open to large costs when representatives from the
Office of Financial and Insurance Services (OFIS) made the same
claims.
OFIS was concerned that schools wouldn't have enough money in
reserve to initially pull claims withdrawals from.
Educators from the southwestern part of the state have recently
pooled together and said they're confident with the amount of
money they put aside for the first few months of the program.
They also said that even though they estimate their annual
savings to be somewhere between six and 18 percent, being able
to look at claim information might make them save even more.
The bills were not reported from committee and are slated to
discussed again Wednesday afternoon.
Michigan School Benefits Bills Held for OFIS
Input
Gongwer News Service, November 29, 2005
A package of bills to allow school districts to pool health care
benefit risks stayed in the Senate Education Committee to allow
the Office of Financial and Insurance Services (OFIS) time to
develop amendments to address concerns officials raised Tuesday.
Committee Chair Sen. Wayne Kuipers (R-Holland) chastised OFIS
Chief Deputy Commissioner Fran Wallace for coming so late to the
discussions on the package and the issue, but said her input on
the bills would be valuable.
"If we're going to move insurance bills we ought to at least see
if we can get the insurance regulator on board," Mr. Kuipers
said.
"We want to be part of a solution," Ms. Wallace said, though she
and legislative liaison Krystal Rourke said they had been
looking at the bills for only a week and so had time only to
raise concerns.
"These bills won't fulfill the goals that everyone has for
them," Ms. Wallace said.
The package (SB 895, SB 896, SB 897, SB 898) would create a
structure for school districts to self-fund their health
insurance or to join pools with other districts. The bills also
would provide for a state-run reinsurance fund to cap losses to
the school funds.
The bills are largely modeled on a proposal developed by the AFT
Michigan and the Association of Operating Engineers (See Gongwer
Michigan Report, October 12, 2005) that supporters said would
provide as much as $573 million in savings over three years by
moving districts away from commercial insurance carriers.
AFT Michigan President David Hecker said the proposal was based
on programs in operation within Michigan and around the country
that have shown savings.
Doug Dirks, chair of the West Michigan Health Insurance Pool,
said the program created under current law took nearly two years
to put in place but is already saving districts as much as 10
percent annually on their health care costs. The pool, under the
Multiple Employer Welfare Arrangement law, has 14 member
districts and another 16 seeking to join.
"I think there's a great desire in the education community to
have additional options," Mr. Dirks said, arguing the package
under consideration would have made creation of the West
Michigan pool easier and potentially more effective.
The key advantage of the proposal, supporters said, is the
requirement that companies providing coverage for school
districts provide claims data for those districts. The bills
also would require access to costs of procedures from various
providers.
"Both the public education employers and their employees would
have access to more detailed information when they're seeking
care," said Suzanne Paranjpe, executive director of the AFL-CIO
Employee Purchasing Coalition and one of the primary architects
of the plan.
But Ms. Wallace joined Blue Cross Blue Shield of Michigan and
the Michigan Education Special Services Agency in arguing that
the information required under the package as it stands could
harm the insurance industry in the state.
Under the bills, insurers would have to provide districts with
annual claims data, but Ms. Wallace said particularly in smaller
districts that information would be of little use in predicting
future losses. She said smaller groups benefit more from looking
at the age and gender of their members.
Gary Fralick with MESSA said the pools have already shown to be
unstable where they have been used, and he said the structure of
the current package would destabilize the entire health care
market, at least as it pertains to schools. Allowing districts
to see their annual claims data and to compare that to other
districts would encourage districts to self-fund if they saw
themselves as having a better-than-average track record, but
then to try to return to commercial insurance if that track
record declined.
Ms. Wallace said the same pattern would also appear with the
state's reinsurance fund as long as it is voluntary. She said it
would become the reinsurer of last resort and so would be more
expensive than commercial insurance, providing less savings that
the proposal was intended. "What you'll really have is one
really good sized expensive group," she said.
And she said the bills do not require enough capitalization for
the state fund. "The fund itself could be bankrupt in the first
few months if it gets a few large claims," she said.
Ms. Paranjpe said the bills provide sufficient regulatory
oversight to prevent failures by allowing the OFIS commissioner
to name a member to the board that oversees the state
reinsurance fund and by requiring the pools to submit actuary
reports annually.
Ms. Wallace said that was not sufficient protection because it
left OFIS with few options to take action if a fund is not
collecting enough to cover its claims. And she said the system
as structured would leave doctors unpaid, or teachers picking up
the bill, if a pool does go bankrupt. "It gives the illusion of
regulatory oversight without giving the commissioner any real
authority," she said.
The current MEWA law provides school districts with a pooling
option that still provides OFIS with oversight of its
operations, she said. And she said the office is gaining
experience both at helping groups fill out the applications and
in processing those applications. She said the West Michigan
pool took more time, about seven months once the application was
complete, because neither party was practiced at the application
process. She said a second pool approved earlier this year took
only three months to process and approve.
"I won't deny that there's been a learning curve on these
things, but we are learning to do them faster," she said.
She also noted that West Michigan spent months negotiating with
Blue Cross to be a third party administrator when the act
prohibits the Blues from performing that service. She urged the
Legislature to address that issue.
And Steve Hill, former risk manager for Detroit Public Schools,
argued the Legislature was looking at the wrong end of the
problem. "We've designed a bucket to collect claims in and we
keep redesigning the bucket," he said. "We need to go back to
the faucet."
He argued that claims are becoming more frequent and more
severe. "Our employees are going straight past all the
preventative care and straight to the critical care," he said.
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