Gover­nor pro­poses mak­ing Mich. Blues tax­able

Modern Healthcare - - MODERN HEALTHCARE - Joe Carl­son

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.

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