Blue Cross Blue Shield of Michigan applauds House Insurance Committee passage of governor's health insurance market reform legislation

December 6, 2012

LANSING, MICH. — Blue Cross Blue Shield of Michigan applauded the Michigan House Insurance Committee today as the panel completed its work on legislation proposed by Gov. Rick Snyder that would regulate all health insurers under consistent guidelines and enable the BCBSM Board of Directors to transition the company to a taxpaying, nonprofit mutual insurer. The legislation – already passed by an overwhelming majority of the state Senate and supported by a broad group of business and health organizations and the state’s two leading newspapers – is now before the full House of Representatives.

“This legislation gives Michigan a modern system of regulation and levels the playing field among insurers to strengthen competition and expand consumer choice,” said Andrew Hetzel, BCBSM vice president for corporate communications. “The legislation preserves Blue Cross as a Michigan-based nonprofit company, committed to contributing in substantial and meaningful ways to help our state build a healthier future.”

The legislation to be considered by the House of Representatives:

  • Requires BCBSM to pay taxes, estimated to total $1.8 billion over the next 18 years. This levels the playing field for BCBSM competitors, which have long considered the company’s tax exemptions to be a competitive advantage.
  • Enables BCBSM to continue as a nonprofit company, and requires it to contribute $1.56 billion over the next 18 years to a separate and independent nonprofit fund that will invest in programs to improve public health and protect the vulnerable. These contributions represent a transformation and continuation of BCBSM’s nonprofit social mission.
  • Sustains BCBSM’s commitment to provide an estimated $800 million in subsidies for its “Medigap” supplemental insurance plans for Medicare beneficiaries through July 2016 – freezing rates in those plans at current levels.
  • Allows BCBSM to be regulated under the same law as its competitors, creating a fair and balanced set of rules for all health insurers in Michigan.

“This legislation represents a unique opportunity to invest in a healthier future for Michigan,” Hetzel said. “Between the new tax revenue, Blue Cross charitable contributions and continued heavy subsidies for Medigap, at least $4.1 billion from Blue Cross will go directly to help Michigan’s people. We encourage the House to pass this legislation, and enable the governor to sign it this year so the Blue Cross board can vote to transition our company to a mutual structure and prepare us to serve Michigan far into the future.”

The legislation was amended by the House committee to include provisions sought by Blue Cross’ competitors and advocates for older adults. These include:

  • A ban on “most favored nation” clauses in contracts between hospitals and health insurers.
  • Language that puts into the law the Insurance Commissioner’s order that BCBSM contribute a “fair share” of reimbursement to hospitals to account for underfunded government programs and uncompensated care.
  • Language that clarifies BCBSM will make its contributions to the state’s new nonprofit fund as long as the company’s Risk Based Capital is above 375% — a level so low the company would come under financial supervision by the Blue Cross and Blue Shield Association.
  • Language ensuring seniors continue to have access to affordable, high quality care, including; Medigap rates remaining frozen until 2016, and after the freeze, $120 million spend by the new nonprofit fund to subsidize Medigap coverage.

“These bills give our competitors – many of which will remain tax-exempt nonprofits even though the Blues will pay taxes – significant wins,” Hetzel said. “We credit the committee and chairman Pete Lund for a process that preserved good legislation while including diverse viewpoints in the final product.” 

Blue Cross Blue Shield of Michigan is a nonprofit corporation and independent licensee of the Blue Cross and Blue Shield Association. Visit www.mibluesperspectives.com for more information.