The least successful way to run a business is to lose money. Just ask the executives at Circuit City. Yet, taking a loss is what Blue Cross Blue Shield of Michigan is admitting it will do with its individual health plans.
The Detroit-based health insurer said it is seeking rate increases products covering about 189,000 people under age 65 that are “far lower than the company actually needs to break even with these products.” Taking a loss is politically smart, given what happened to Anthem in California earlier this year when it sought rate hikes of up to 39%. Politics aside, the Michigan Blues, even if those rate increases are approved, expects to lose up to $40 million in the individual market.
That loss means one of two things. Either the Michigan Blues will recoup those losses with gains in other business segments. But that approach isn’t a winning formula, for it probably means that small-group and/or large-group premiums are being inflated to cover those losses. That doesn’t sound like health care reform at work.
The other option is more troubling – and more likely. The Michigan Blues will accept its losses in the individual market for the time being and hope the regulatory climate improves and reasonable rate hikes are possible next year. Of course, a better regulatory climate, as federal and state regulators dig deeper into reform’s implications and implementation, appears unlikely, if not impossible. If the health insurance climate doesn’t improve, then the Michigan Blues will have to look at how long it can continue to support those losses.
Like the Michigan Blues, other health insurers should be clear when they seek minimal increases and accept maximum losses in certain markets. The best advertisement against health care reform now may be health insurance companies admitting what everyone in the industry already knows: Health care reform could ultimately force them one by one out of business.