Michigan governor pushes plan to make BCBS of Michigan a mutual company
Michigan Gov. Rick Snyder wants to bring Blue Cross Blue Shield of Michigan under the same laws regulating other insure by forcing it to become a mutual insurance company effectively stripping it of its tax exemptions.
Under Snyder's plan, in legislation introduced in the Michigan Senate this week, Blue Cross Blue Shield of Michigan would become a mutual nonprofit, owned by its members, and would lose its current tax exemptions and start paying an estimated $100 million in local and state taxes annually. The company would also contribute $1.5 billion over 18 years to a new non-profit organization promoting public health and wellness programs, to be managed by the state.
"Michigan needs a new regulatory environment that continues our reinvention and allows us to attract the kind of investment that will fuel our comeback," Snyder, a Republican and former venture capitalist, said in a statement on his website.
The plan would bring Blue Cross Blue Shield of Michigan under the same regulations as all other insurers in the state, the Michigan Insurance Code. Since 1980, Blue Cross Blue Shield of Michigan has been regulated under a special insurance code, because the company has been the "insurer of last resort," a function that won't be necessary in 2014, when the Affordable Care Act requires everyone to be offered coverage.
Also under the plan, the company would be able to have rate changes approved under the same timeline as other insurers, and it would honor an agreement with the Michigan Attorney General to freeze rates for supplemental Medicare coverage, or Medigap, through at least 2016.
Blue Cross Blue Shield of Michigan's board of directors would have to agree to the plan. So far, company executives are greeting it as a mixed bag.
"This plan is not exactly what Blue Cross would have proposed, but it does create a fair and balanced set of rules for health insurance," president and CEO Daniel Loepp said in a statement on the company's website.
The proposal has revived some apparently long-standing acrimony between Blue Cross Blue Shield of Michigan and the Michigan Association of Health Plans, which thinks the Governor's proposal, as outlined now, doesn't go far enough in levelling the state's health insurance playing field. As the trade group has been pointing out, the American Medical Association ranks Michigan as the fourth least competitive health insurance market in the country.
With about 4.4 million members, Blue Cross Blue Shield of Michigan serves about 70 percent of Michigan's health insurance market. The Michigan Association of Health Plans says that's been gained through anti-competitive practices, like the "most favored nation" clauses in provider contracts that allegedly prevent providers from negotiating reimbursement rates with other insurers that are lower than those given to BCBSM.
Those clauses have been contested for some time. Aetna, the former Michigan Attorney General and the U.S. Justice Department have all filed civil anti-trust lawsuits against Blue Cross Blue Shield of Michigan targeting the clauses within the past few years, and the matters are still in court. Recently, Michigan's Insurance Commissioner announced most favored nation clauses would be barred, starting in February 2012, unless approved by his office.
Rick Murdock, executive director of the Michigan Association of Health Plans, thinks most favored nation clauses should be banned outright. "Government should be setting up a framework that allows fair competition, and should monitor competition to see that it is working," Murdock told Healthcare Payer News.
Andy Hetzel, vice president of corporate communications for Blue Cross Blue Shield of Michigan, denied the idea that the company has engaged in anti-competitive practices. "Just because because we're the largest doesn't mean we're anti-competitive. We're just doing better business."
Those issues aside, though, Hetzel said it's about time the state reform its insurance laws: "Michigan is a laggard nationally in how it regulates its health insurers. We do have really one of the worst systems in the country, with a hodgepodge of rules."
Snyder, the governor, has said he wants the changes to be effective by 2014.
While the proposal works its way through the legislature, Michigan's Attorney General wants to hire an independent firm to appraise Blue Cross Blue Shield of Michigan's assets. The state's Insurance Commissioner told lawmakers this week, as Michigan Live reported, that if the company is sold or dissolves itself, the new state-controlled philanthropic nonprofit would get funds equal to the market value of the company at the time of the sale.
