BCBSM editorial in Crain's Detroit Business

The following is an editorial from Andrew Hetzel, vice president of corporate communications at Blue Cross Blue Shield of Michigan that first-appeared in Crain's Detroit Business on Oct. 31, 2010:

Allow the Blues to work out the best contract

On Oct. 18, the U.S. government sued Blue Cross Blue Shield of Michigan for delivering the lowest possible health care prices to our customers through the reimbursement contracts we negotiate with Michigan hospitals.

Especially now, as the government puts intense political pressure on private insurers to control premiums, it makes no sense for it to undermine the ability of insurers to negotiate the most favorable pricing we can possibly achieve.

Health care costs are straining the resources of every business and family in Michigan. BCBSM covers about 4 million Michiganders and is obligated by a 30-year-old state law to provide statewide access to health care at a reasonable cost.

None of our competitors share the Blues' statutory mission. To fulfill it, BCBSM prioritizes having contracts in place with all Michigan acute care hospitals, while ensuring that these contracts deliver exceptional value to our customers in the form of the deepest possible volume discount savings.

BCBSM's negotiated volume discounts across all hospitals, physicians and pharmacies in our network saved our customers nearly $13 billion in 2009 alone. Our payout that year approached $20 billion. The impact of that level of annual savings on the affordability of health care in Michigan cannot be overstated.

The government alleges that BCBSM is quashing competition by delivering low-price guarantees in our contracts. But competition is thriving in Michigan's health insurance market. BCBSM membership has declined over the past two years, while membership in competing HMOs has risen. There is price and service competition in Michigan. Some HMOs have aggressively acquired competitors to expand their service areas and compete with BCBSM. BCBSM, while large, has less than 50 percent market share in the majority of Michigan counties.

A tenet of American commerce is that large customer volume drives low prices. If you shop at a mega retailer — or if you are an American taxpayer served by the use of "most favored nation" clauses in U.S. government contracts — you benefit from low prices driven by volume discounts.

The same should hold true for health care. Large-volume payers such as BCBSM should have the ability to negotiate fair and reasonable reimbursement arrangements with hospitals that deliver the best possible price to our customers. These arrangements help the hospitals — which enter into them willingly — with revenue flow and a reasonable margin above their cost. They also provide our customers what they demand — low prices that keep health care more affordable.

View the original article: http://www.crainsdetroit.com/article/20101031/FREE/310319980