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LANSING, Mich. -- Michigan's insurance commissioner has barred the state's largest health insurer from imposing a minimum participation requirement on some employer clients.
Benefit consultants say that minimum participation rules are one of several strategies that health plans employ to minimize the risk of winding up with a preponderance of high-cost enrollees.
In an order dated July 22, Insurance Commissioner E.L. Cox said the Blue Cross & Blue Shield of Michigan policy violates Michigan's NonProfit Health Care Corporation Reform Act.
The policy under attack required that 75% of an employer's workforce be enrolled in a Blues plan -- either an indemnity plan or a health maintenance organization -- or the Blues would not offer its traditional indemnity health plan to the group.
The Michigan commissioner's order rejected the Blues' contention that its policy fits under the law's exceptions.
"Giving legislative intent respecting access to health care services its full import, and giving appropriate weight to comparable provisions in the Code and the Act, all lead to the conclusion that the participation requirements violate" the state law, the commissioner's order states.
The Michigan Blues plan adopted its current policy in July 1993. Previously, the insurer's policy was that 75% of an employer's workforce had to be enrolled in any health plan or it wouldn't offer its traditional plan.
A spokeswoman for the Michigan Blues explained that its policy applies only to employers with fewer than 100 employees and said it was needed to help "the company achieve a mixed pool of members."
The spokeswoman for the Michigan Blues said the company is reviewing the order for possible appeal to the state's courts. "We think the action goes against our opinion of equity," she said.
In a statement, BC/BS of Michigan said that the order, if left standing, could mean higher rates for community-rated group customers.
Minimum participation rates are common in Blues plans across the country, said a spokeswoman for the Blue Cross & Blue Shield Assn. in Washington.
Participation rules are not uncommon, but a required level of 75% is unusually high, according to Rich Sinni, health care practice leader in the New York office of Watson Wyatt Worldwide. "I believe it's quite unique," he said.
Despite the Blues' policy, many health plans do not have minimum participation levels and typically accept whatever percentage of employees enroll in the plan, whether it's 1% of the population or 99%, he said.
Health plans use minimum participation requirements to prevent the adverse selection that would occur if only high-cost employees enrolled in a plan, benefit consultants say. By requiring a minimum participation level, the plans hope to pool the risk of high-claims participants with low-claims enrollees.
Another way health plans avoid adverse selection, is to require employers to pay all or most of the premium, which creates a financial incentive for a larger percentage of employees to enroll in the plan, said Helen Darling, practice leader-group benefits and health care in Watson Wyatt Worldwide's Stamford, Conn., office.
Without such incentives for enrollment, "people who take it will be high users," she said.
Alternatively, insurers wishing to avoid adverse selection may require employers to offer a selection of health care plans, so that enrollees have multiple options and high users get spread among them, she said.
Although she had not heard of another state acting to bar minimum participation provisions, as Michigan did, Ms. Darling said the move did not surprise her. Such action, she said, shows a growing trend by state officials and legislatures to intervene in health care. "It's a much more activist period" by all levels of government, she said.