Russ Moore: Who Wins + Who Pays In RI’s $20M Blue Cross Settlement
Monday, August 26, 2013
A $20 million settlement deal the state of Rhode Island struck with Blue Cross is costing whom, and benefitting whom?
When Robert Clark Corrente, the former US Attorney for Rhode Island, (appointed by President George W. Bush), announced a settlement with Blue Cross Blue Shield of RI that forced the company to pay a $20 million fine in late 2007, he assured the public that Blue Cross was forbidden to raise premiums in order to make up for the penalty. But that’s impossible.
I remember standing at the press conference back in late 2007. Everyone in the room knew it was an absurd comment that would insult the intelligence of an amoeba. The state health insurance commissioner was already on record saying, prior to then, that Blue Cross reserves were relatively low. Money is fungible, and insurance premiums are the only revenue source for Blue Cross.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTWhere it all began
The settlement that Corrente announced in 2007 was regarding Blue Cross improperly lobbying high-ranking legislators to restrict consumer choices for prescription drugs in the late nineties and at the early turn of the century. Blue Cross didn’t want to allow members to purchase prescription drugs at supermarkets like Stop & Shop or pharmacies like Walgreens. That meant less consumer choice for Rhode Islanders, and, if you believe in free market economics, higher prices.
Blue Cross agreed to the deal in order to avoid indictment. In other words, Blue Cross agreed to raise health insurance premiums in order to avoid prosecution. That’s a sweet deal for Blue Cross executives, but what about the average Rhode Islander—who had been paying higher prices for prescription drugs and had less consumer choice for no good reason? They got rate hikes.
Over the last several years, Blue Cross has persistently sought, and received, rate hikes, according to data culled from the state health insurance commissioner’s website. In 2010, the company received an average rate hike of 8.4 percent for small businesses (less than 50 employees), and a hike of 12.3 percent for larger companies (50 or more employees). In 2011, the company hiked rates by an average of 8 percent for small business, and 9.7 percent for larger companies. In 2012, the company hiked rates by an average of 3 percent for small businesses, and 7.9 percent for larger organizations.
More healthcare mandates, more rate hikes
This year, given Obamacare’s new mandates and plan designs that would confuse even the biggest health care policy wonks, it’s not as easy to quantify the percentage hike in the cost of health insurance—but rest assured they’re higher.
The ridiculous inflation rate in the costs of medical care is obviously the biggest culprit of the rising costs of health insurance. But anyone who thinks the $20 million fine didn't contribute to the insurance rate is being naïve.
Where'd that $20 million go?
The good news was that the $20 million dollar fund would be used to improve health care for Rhode Islanders, Corrente said. The Rhode Island Foundation became the stewards of the fund and named it the Fund for a Healthy Rhode Island.
The fund suffered in the financial meltdown of 2008. Before making a single grant, the fund’s value dropped to $15.4 million. Fortunately, thanks to the stock market recovery, the fund stands at $17.9 million—even after making $4.5 million in grants, according to RI Foundation Spokesman Chris Barnett.
The main focus of the fund, Barnett said, is to increase the availability of primary care physicians in Rhode Island. The state, as well as the nation, has a shortage of primary care physicians. To help address the issue in Rhode Island, the fund has been used to create a loan forgiveness program, not only for primary care physicians, but also nurse practitioners, physician’s assistants, and dentists. Thus far, $1.6 million has been set aside for that grant program.
The program awards $20,000 per year to grantees in loan forgiveness for primary care doctors, for a maximum of 4 years. The nurse practitioner and physician assistant program forgives $10,000 per year, for a maximum of 4 years. To be eligible for the loan forgiveness, the health providers must provide an average of 32 hours per week of direct patient care.
More grants given out
The fund also sent out a number of grants to Rhode Island nonprofit organizations focusing on improving health care for lower income Rhode Islands. The list includes grantees such as Butler Hospital ($228,077), East Bay Community Action Program ($130,700), Miriam Hospital ($244,701), Northwest Community Health Center ($70,000), Providence Community Health ($750,000), Rhode Island Free Clinic (grants of $133,334 and $300,000), RI Nurses Association ($80,000), Taming Asthma ($35,000), Thundermist Health Center ($300,000), Tri-Town Community Program ($167,852), and Tri-Town Community Action ($80,000).
Assuming the money goes where those grants are spent according to plan, all of those grants will help improve care and the quality thereof to Rhode Islanders.
But the fund also made what could be considered some controversial grants. The fund awarded an $80,000 grant to Planned Parenthood of Southern New England—guaranteed to provoke the ire of pro-life activists.
ShapeUp RI was also awarded a grant of $250,000 to partner with primary care doctors to try to get people to exercise and eat better. Inspiration comes from within, and fitness and health are a personal choice, and I doubt that anyone is going to have some kind of awakening that they need to get into better shape thanks to Shape Up RI receiving this massive grant.
Latino Public Radio, founded by the politically active Dr. Pablo Rodriguez, a prominent supporter of Governor Lincoln Chafee, received a grant of $51,083 in 2009. The grant, according to the RI Foundation, allows the station to discuss health care options for those with few resources.
Who paid for all of it?
Regardless of how anyone feels about any of the programs that have received the grants thus far, it should be kept in mind that they’re financed by Blue Cross ratepayers, and in the end, that’s who really owns Blue Cross—the members. So in effect, the Blue Cross ratepayers paid for these grants by way of the rate hikes, ordered by Corrente. It’s charity by force.
But weren't the ratepayers the harmed party in all of this? The people that were harmed in the first place are the ones making the restitution.
Blue Cross is a large employer comprised mostly of good, responsible, and ethical employees—to be sure. And the actions of a few, albeit high ranking executives from the past, should not tarnish the reputation of the good folks who are employed there.
Yet at the same time, it’s hard to see how Blue Cross has really made restitution for its sins when all that’s really happened is the company’s ratepayers have made some charitable donations they never authorized in the first place.
The Rhode Island Foundation, through no fault of its own, is in a position where it’s picking winners and losers—all at the expense or ratepayers. In the end, the whole thing seems like one big, illogical mess.
A native Rhode Islander, Russell J. Moore is a graduate of Providence College and St. Raphael Academy. He worked as a news reporter for 7 years (2004-2010), 5 of which with The Warwick Beacon, focusing on government. He continues to keep a close eye on the inner workings of Rhode Islands state and local governments. Follow Moore on Twitter @russmoore713.
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