May 10 2013 12:00 AM

New insurance company to fill insurance gap

Dennis Litos. Courtesy photo.

Friday, May 10 — While the Legislature dithers over whether Michigan’s working poor should be allowed affordable health insurance, a consortium of local health agencies is moving ahead with expanding healthcare options for the state’s low-income families and small businesses.

Consumers Mutual Insurance of Michigan will offer health insurance to individuals and small groups throughout Michigan. A formal announcement of the company will be Monday at a Lansing news conference. Details of the initiative, however, became available this week on the company’s website.

Consumers Mutual is sponsored by a coalition of 15 county health plans, which it characterizes as “private, nonprofit corporations that currently provide limited health coverage benefits to low-income individuals in Michigan.”

As a member-owned mutual insurer, the company will target families and individuals who, even with federal premium subsidies, cannot afford quality healthcare insurance. The company states that “becauseConsumers Mutual will use profits to lower costs and improve benefits, we expect our insurance will be attractive and affordable.”

The new company is headed by Dennis Litos, former CEO of Ingham Regional Medical Center (now McLaren Lansing). After working in California for six years, he returned to Lansing last year to become CEO of Consumers Mutual.

“I’ve always had a heart for the uninsured. It’s always been a passion of mine,” said Litos in a statement on the mutual’s website.

Litos played a role in formation of the low-cost Ingham Health Plan while working at Ingham Regional.

“This is a great opportunity to give back in a period of health reform,” he said.

The Affordable Care Act established health insurance CO-OPs to foster the creation of new consumer-governed nonprofit health plans. The program provided $3.4 billion in funding to encourage every state to establish a CO-OP and capitalize eligible prospective CO-OPs through Start-up and Solvency Loans.

Michigan is one of 24 states which will have a non-profit insurance co-op. Consumers Mutual received $72 million loan from the federal Centers for Medicare and Medicaid Services a year ago. About $12 million is being used for startup costs, with $60-million going into reserves.

“CO-OPs will promote competition and give consumers more health insurance choices,” Marilyn Tavenner, CMS acting administrator, said when the loan to Consumers Mutual was announced. “These new private nonprofit insurers will be run by consumers and are designed to offer individuals and small businesses more affordable, consumer-friendly and high-quality health insurance options.”

One of the goals of the federally backed program is to provide more competition in private insurance. According to the American Medical Association, Michigan has the third least-competitive insurance market with Blue Cross Blue Shield of Michigan controlling 69 percent of the market, and 80 percent of the PPO market in Lansing.

As a mutual co-op, the company will be governed by its members: individuals and businesses that purchase the coverage. The company being a mutual insurer will allow it to offer lower-cost coverage.

Consumers Mutual actuarial analysts expect initial enrollment of 37,000 people statewide. Families/individuals with incomes up to 400 percent of the federal poverty level will be eligible for premium subsidies, as will businesses with fewer than 50 employees. Consumers Mutual expects to begin enrolling customers in October, with coverage effective Jan. 1. Policies will be sold through the online Health Insurance Exchange.

According to Consumers Mutual, community health plans operate in 74 of Michigan’s 83 counties and provide non-insurance healthcare coverage to 150,000 Michigan residents.Consumers Mutualhopes to use the existing delivery system to develop a statewide network including the nine counties that are not currently served by a community health plan.

The establishment of Consumers Mutual will not be directly impacted by the legislative debate on expanding Medicaid coverage. Gov. Rick Snyder is urging the Legislature to take part in the federal expansion of coverage. All of the costs of the expansion will be covered by the federal government through 2016, and phased down to 90 percent federal funding by 2020.

Individuals and families below 138 percent of the federal poverty level would become eligible for Medicaid coverage, adding an estimated 500,000 people to the program. Accepting the expansion would also shift some current state costs to the federal government, saving Michigan $1.1 billion over the next decade.

Republicans are resisting the expansion. Earlier this week they introduced a plan which would require poor families to pay 5 percent of their gross income for coverage. The GOP bill would end medical coverage for the working poor after 48 months. Both requirements, which are unprecedented nationally, would require waiver of federal Medicaid rules.

House Democratic leader Tim Greimel derided the proposal as “heartless, irresponsible and an insult to the people of Michigan.”