Blue Cross Blue Shield of Michigan asks Legislature to readdress health insurance reforms early in 2013 after veto by Gov. Snyder

December 28, 2012

DETROIT – Blue Cross Blue Shield of Michigan will ask the Michigan Legislature to take action early in 2013 to pass the health insurance market reforms contained in Senate Bills 1293 and 1294 that were proposed by Gov. Rick Snyder in a form that both legislative chambers and the governor can support.

The insurance reforms 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. These reforms were proposed by the Governor in September, and eventually gained support of an overwhelming majority of the state Senate, a broad group of business and health organizations and the state’s two leading newspapers.

“We are disappointed with the veto but understand the Governor’s decision,” said Andrew Hetzel, BCBSM vice president for corporate communications. “We also understand why he proposed the legislation in the first place. Michigan needs a modern and fair system of regulations for health insurance that encourages competition and expands consumer choice. The governor’s proposal is also an unprecedented opportunity to invest billions in creating a healthier future for Michigan’s people.”

Key provisions of the legislation include:

  • BCBSM will 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.
  • BCBSM will remain a nonprofit company, and as an expression of its nonprofit mission, it will 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.
  • BCBSM will 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.
  • BCBSM will be regulated under the same law as its competitors, creating a fair and balanced set of rules for all health insurers in Michigan.

The legislation also includes 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 requiring subsidies for Medigap insurance to be provided to low-income seniors by the state’s nonprofit fund through 2021.

“Between new tax revenue, Blue Cross charitable contributions and continued heavy subsidies for Medigap, more than $4 billion from Blue Cross will go directly to help Michigan’s people,” Hetzel said. “This legislation has the support of our industry competitors and major job providers. We encourage the Legislature to reintroduce and prioritize passage of these bills again, so our state has a modern system of regulation in place as early as possible next year.”

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

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