Governor proposes making Mich. Blues taxable
Mich. governor proposes making state Blues plan taxable
For 32 years, Blue Cross and Blue Shield of Michigan has been regulated under a special law that recognizes its status as the only insurer in the state that accepts all who apply for insurance—a law whose purpose is muted by the requirement in the Patient Protection and Affordable Care Act that all insurers must do the same starting Jan. 1, 2014.
Michigan Gov. Rick Snyder announced a plan last week to bring the state’s dominant health plan into the same regulatory framework as every other insurer in the state, which would involve the Blues paying $100 million in taxes to local and state governments and setting aside $1.5 billion over 18 years for a new notfor-profit dedicated to public-health initiatives.
The changes, if enacted by the state Legislature and approved by the Blues board members, would legally transform the company from a “nonprofit healthcare corporation” into a not-for-profit mutual insurance company whose policyholders would have ownership rights, similar to 11 other mutual Blues plans that operate in 18 states.
The changes would not, however, affect the ongoing antitrust litigation filed jointly against the Michigan Blues by the U.S. Justice Department and the state attorney general’s office— even though the attorney general would have a seat on the board of the new not-for-profit organization that would make decisions on how to spend the $1.5 billion in company money.
“We fully expect our lawsuit will continue forward,” said Joy Yearout, spokeswoman for Michigan Attorney General Bill Schuette, adding that the new not-for-profit is a long-term goal: “We’re a long way from that happening right now. This is just in the planning stages … It’s not of great concern.”
The Michigan Blues is the dominant insurer in the state, covering 4.4 million of the state’s 10.5 million residents, and 70% of Michigan’s commercially insured population.
Dave Waymire, spokesman for the Michigan Association of Health Plans, said the proposal to revamp the regulations wouldn’t address what other insurance companies say is the real problem—Blue Cross’ massive market position.
“The fundamental issue facing the market in Michigan is that it is the fourth worst in the nation in terms of competition,” Waymire said. “And we are concerned that this arrangement that has been reached between the governor and Blue Cross will not change the fact that they control 70% of the market. Therefore, we will still be one of the least competitive states in the nation, and that will still be bad for consumers.”
Andrew Hetzel, corporate spokesman for the Michigan Blues, said it wasn’t clear whether the new rules would affect the company’s market position.
“It’s hard to forecast how a change in regulation would affect market share. We do believe that a change in regulation will encourage competition,” he said. “We’d like to see our ability to innovate enhanced by this. … And we’d like to see a healthy, robust competition on price.”
In written comments, the governor said the proposal is intended to foster a more level playing field among insurers.
“The old way of doing business doesn’t meet Michigan’s demands today for a competitive and efficient healthcare system,” Snyder said. “Michigan needs a new regulatory environment that continues our reinvention and allows us to attract the kind of investment that will fuel our comeback. This proposal will help us do that.”
Hetzel said company officials would support the proposal as it moves through the state Legislature as long as it contains two key aspects of the governor’s plan: that the Michigan Blues remains a not-for-profit company after the transition, and that all insurance companies in the state would fall under the same regulations.
Ultimately, the company’s board would have to vote after the Legislature approves the changes in the law, because the existing legislation prevents the insurer from changing its status. Once that prohibition is removed, the company would then decide whether to convert into a mutual benefit company and become subject to taxes and public-health spending provisions outlined in the final bill, Hetzel said.
Snyder last week called for Blue Cross to become a not-for-profit mutual insurance company.