Executive
Report        

Rate hikes granted to Blue Cross/Blue Shield

A CONTROVERSIAL 48 percent increase in Blue Cross/Blue Shield of Chicago insurance rates, affecting more than 74,000 individual and small group policyholders, was approved in May by the state Department of Insurance. The increase became effective July 1, provided Blue Cross/Blue Shield cooperates with the Department to hold a series of workshops for small businesses on how to contain health care costs. In addition, the department conditionally granted Blue Cross/Blue Shield a 38 percent increase in supplemental Medicare policy rates requested for January 1982. To get this rate increase the company must complete 16 new cost control initiatives which will be reviewed during hearings held in mid-October.

Blue Cross/Blue Shield said the increases were necessary because a $30 million loss last year coupled with a projected $24 million loss this year would reduce the company to a three-week reserve of funds. Blue Cross/Blue Shield had asked for 53 and 43 percent rate hikes, respectively.

Approval of the rate increases, the first since 1977, came on the recommendation of Dr. Kenneth Tannenbaum, hearing officer for the Department of Insurance, after public hearings conducted in March. In a report to department director Philip O'Connor, Tannenbaum found that Blue Cross/Blue Shield had proved both a financial need for the rate increases and a "vigorous, good faith effort" to institute' cost containment programs which had previously been mandated by the department, In 1978 and 1980 Tannenbaum had turned down requests for rate increases, finding that Blue Cross/Blue Shield had maintained inadequate cost containment programs.

In granting the rate hikes, O'Connor said, "Dr. Tannenbaum's report makes clear my obligation to grant this painful increase. There is no way to look at a 48 percent increase as anything but large. However, because it is the first in four years, it represents an increase of 10.5 percent per year, well below the annual inflation rate during that time. I believe this is proof that the cost containment measures mandated by the Department of Insurance have been effective."

But senior citizen and consumer groups disputed the findings of a private consulting firm hired by Blue Cross/Blue Shield and said that the company did not need to maintain higher reserve levels. The groups also said that Blue Cross/Blue Shield had failed to use its financial leverage to hold down health care costs.

Phillip Snelling, a Chicago attorney who represented the senior citizen group, the Gray Panthers, at the March hearings, said that cost containment measures already in place were too tentative. "We felt particularly that improvements could be made in the second medical opinion programs. If [Blue Cross/Blue Shield] offered incentives to patients, such as an increase in benefits if they sought a second opinion before surgery, the effort to eliminate unnecessary surgery would be more effective. Right now hardly anyone takes advantage of such programs, but in states that offer increased benefits, programs like that have been enormously successful.''       John Martin

26 | August 1981 | Illinois Issues

Residential and local government energy audits

Illinois electric and natural gas utilities will begin offering home energy audits to their residential customers October 16 in a program designed to foster awareness of energy conservation methods. (Some utilities are already doing energy audits.) The program, known as the Residential Conservation Service, was developed by the Institute of Natural Resources (IINR) in response to the National Energy Conservation Policy Act which requires utilities to provide energy conservation services. For a $15 service charge, utility auditors will show residential customers where their energy bills can be trimmed, provide a list of contractors who could make necessary improvements and a list of lending institutions who could provide financing.

IINR estimates that home energy bills can be cut by $16.4 million a year if only 5 percent of eligible customers ask for audits and follow the resulting recommendations.

Under another state energy conservation program, 17 regional planning offices will offer energy audits to local government buildings such as police stations and libraries. Governmental units can request audits from their local regional planning agency or by calling Jerry Davis of HNR at 217/785-8570 or Jeff Mitchell of the Department of Commerce and Community Affairs at 217/785-4200.

State bond sales

General obligation bonds totalling $150 million were sold by the state May 19 to a syndicate headed by Morgan Guaranty Trust of New York, according to the Bureau of the Budget. The bonds, which were sold by sealed bid, carry a net interest cost of 9.64 percent and have an average maturity of 13 years. Another bond sale is expected sometime in the fall. The state sells bonds three times a year and has maintained its "AAA" rating.

Technical assistance to small towns

Grants totalling $473,125 from the U.S. Economic Development Administration (EDA) and the state of Illinois were authorized in June to continue a program of technical assistance to small communities seeking to further their economic development. The program does not provide direct grants to communities to finance development projects. (The Department of Commerce and Community Affairs, which administers the program, received several inquiries on this point from hopeful municipalities.) The program does provide, however, for workshops and conferences with municipal leaders on such areas as financing, industrial development and downtown development. The EDA's share of the grant is $378,500; the state's share is $94,625.

Public aid cuts

The state's commitment to reduce medical assistance expenditures by $150 million (see June Illinois Issues p. 26 and May p. 13) resulted June 15 in the elimination of state payment for 800 over-the-counter drugs for Medicaid recipients. The cuts total $9 million, but the state will continue to pay for essential prescribed drugs and six categories of over-the-counter products including vitamins for pregnant women and children under age two.

The biggest cuts, totalling $26.1 million, will come from setting maximum rates hospitals can charge the state for clinic, outpatient and emergency-room treatment, according to the Department of Public Aid. Similar maximums for inpatient hospital costs are expected to save another $18 million. Other cuts totalling approximately $9 million are expected, but will probably require waiver of federal regulations or changes in state law.

Pay hike for word processors

An independent arbitrator ruled in April that the state must give approximately 300 word-processing equipment operators a one-grade raise in pay, effective July 1 and retroactive to April 1980. The American Federation of State, County and Municipal Employees asked for arbitration under its collective bargaining agreement last year, because the state word-processing correspondents felt they were not receiving adequate compensation for the skills they brought to the job. The ruling affects equipment operators in all three word-processing pay grades, and will add $1 to $5 to monthly paychecks.

Education for the gifted

Illinois is one of six states to participate in the National Consortium for State Leadership in the Education of Gifted and Talented Children, according to the State Board of Education. The Consortium will provide information on issues and practices in gifted student education to state government and education officials and attempt to broaden educational opportunities for gifted students.

Arts and Humanities joint fund

A fund totalling $20,000 has been established jointly by the Illinois Humanities Council and the Illinois Arts Council to foster cultural projects combining the arts and humanities. The fund, the first cooperative venture by the two councils, will be used in the form of grants for innovative proposals in a variety of fields, including music, dance, lectures and performances. The deadline to receive proposals is August 14, but applicants can call either council before then for help in submitting proposals.

August 1981 | Illinois Issues | 27