Blue Cross Blue Shield of Michigan says Snyder plan will modernize health insurance regulations

BCBSM will remain nonprofit, pay taxes, contribute approximately $1.5 billion to new state nonprofit organization

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Sep 11, 2012, 10:00 ET

DETROIT, Sept. 11, 2012 /PRNewswire/ -- Blue Cross Blue Shield of Michigan today recognized the leadership of Gov. Rick Snyder for advancing a proposal to streamline and modernize Michigan health insurance regulation – a goal long sought by the Blues.

"Blue Cross has long advocated for all health insurers to play by the same rules," said Daniel J. Loepp, BCBSM president and CEO. "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. Regulations should be fair to all. They should protect consumers, expand choice and competition and preserve an insurance safety net people can count on. Our board is open to considering this proposal because it preserves Blue Cross' nonprofit mission and sets Michigan's insurance market up for success in the future."

If the Governor's plan is adopted by the Michigan Legislature and supported by a vote of the BCBSM Board, Blue Cross would transition the company's structure to a nonprofit mutual insurance company that would be regulated under the same law as other insurers and HMOs in Michigan. BCBSM would join 11 other Blue Cross Blue Shield companies around the country structured as mutual insurers, where policyholders have ownership rights defined by each company's bylaws. These companies operate in 18 states.

The Governor's proposal comes after a year of discussions following a special message from the Governor in September 2011. It would have BCBSM contribute approximately $1.5 billion over 18 years to establish a new nonprofit, to be set up by the state and run by separate board. This contribution would be about 25 times larger than the amount any other Blues Plan has contributed following a transition to a nonprofit mutual insurance company structure. The new nonprofit organization would fund programs to improve health care in Michigan and keep it affordable. This would be an evolution of BCBSM's traditional nonprofit "social mission." BCBSM would remain based in Michigan.

The plan also calls for BCBSM to pay an estimated $100 million per year in state and local taxes.

Under current Michigan statutes, commercial health insurance companies, nonprofit HMOs and BCBSM are all regulated under different laws with different rules. Some companies pay taxes and some do not. BCBSM serves as "insurer of last resort," offering policies to anyone regardless of their health condition – while all other insurers and HMOs are allowed to reject applicants for their health. BCBSM rates are subject to strict state oversight, while other carriers' rates are not subject to the same strict review processes.

"Regulating every company the same makes sense," Loepp said. "Our competitors complain that our tax-exempt status gives us a competitive edge, and we say that our strict regulations give them an edge. The Governor's proposal smoothes out those edges. It makes everyone play by the same rules."

BCBSM would remain a guarantee-issue insurer, accepting everyone who applies for coverage regardless of their medical history. New federal laws require all other carriers to do this beginning January 1, 2014.

In addition to transitioning to a nonprofit mutual insurance company structure, BCBSM would evolve its traditional "social mission" by funding a new nonprofit entity to be created by the state with contributions totaling approximately $1.5 billion, payable in installments over the next 18 years. The nonprofit would be governed by its own board, which would include the Michigan Attorney General. The board would be supported by a large and diverse advisory council comprised of community stakeholders. The nonprofit would use BCBSM contributions to fund programs to improve health care in Michigan and keep it affordable.

"We are pleased that the Governor respects Blue Cross' desire to remain nonprofit and continue our longstanding efforts to advance quality and affordable health care for all Michiganders," Loepp said. "Blue Cross will remain based in Michigan, invested in our communities and focused on improving health care for everyone who calls Michigan home."

The transition in corporate structure would not change BCBSM or Blue Care Network of Michigan coverage for any of the company's 4.4 million Michigan members, nor would it affect the contracts the company has to administer coverage and claims for self-insured customers. It also would not affect the contracts BCBSM and BCN have in place today with hospitals, physicians and other health care providers.

Blue Cross Blue Shield of Michigan is a nonprofit corporation and independent licensee of the Blue Cross and Blue Shield Association. For more company information, visit bcbsm.com.

SOURCE Blue Cross Blue Shield of Michigan