Gov. Rick Snyder makes Blue Cross Blue Shield of Michigan transition a legislative priority for 2013

Jan. 16, 2013

DETROIT – In his state of the state address tonight, Gov. Rick Snyder prioritized the passage of legislation to enable Blue Cross Blue Shield of Michigan to transition to become a nonprofit mutual insurance company regulated under the same law as its competitors, thereby creating a modern and consistent regulatory system for health insurance in Michigan.

Similar legislation was passed by both the House and Senate last year after extensive public hearings and testimony.

“The Governor’s proposal to overhaul Blue Cross’ outdated regulations presents unique opportunities for Michigan and should be adopted by the Legislature,” said Andrew Hetzel, BCBSM vice president for Corporate Communications. “It creates fair competition among health insurers, expands consumer choice and generates millions in new revenue for state and local governments. It establishes a $1.5 billion endowment to invest in Michigan’s health – by far the largest fund created by any state where a nonprofit Blue Cross plan has transitioned into another form of nonprofit structure.”

“We are encouraged by the governor’s emphasis on making these reforms a priority,” Hetzel said. “We are asking for prompt attention by lawmakers within the first quarter of this year. Our industry is facing a year of significant change with the opening of the health exchange. Consistent regulations are necessary now, to enable a functional marketplace and ensure Blue Cross can participate on the health exchange along with our competitors.”

Key provisions of the governor’s original proposal included:

  • BCBSM would pay taxes, estimated to average $100 million per year over the coming decades. This levels the playing field for BCBSM competitors, which have long considered the company’s tax exemptions to be a competitive advantage.
  • BCBSM would remain a nonprofit company. As an expression of its continuing nonprofit mission, BCBSM would contribute $1.5 billion over the next 18 years to a separate and independent nonprofit fund to invest in programs to improve public health and protect the vulnerable.
  • BCBSM would 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 would be regulated under the same law as its competitors, creating a fair and balanced set of rules for all health insurers in Michigan. 

Blue Cross is supportive of an amended version of the legislation that passed the House Insurance Committee with provisions sought by Blue Cross’ competitors, consumer groups and advocates for older adults. These included:

  • Language that would prohibit BCBSM from converting to a for-profit company.
  • Language that added another $60 million in BCBSM contributions to the $1.5 billion proposed by the Governor.  This would further enable the state’s nonprofit foundation to subsidize Medigap after the BCBSM rate freeze expires.
  • A ban on “most favored nation” clauses in contracts between hospitals and health insurers.
  • Language that clarifies BCBSM would make its contributions to the state’s new nonprofit fund as long as the company’s Risk Based Capital is above 375 percent -- 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.

“This legislation has broad consensus support from our industry, the business community, leading health organizations and major newspapers,” Hetzel said.  “The Legislature begins to address this issue on firm footing, following days of testimony and hard work by lawmakers on the original plan.  We look forward to the Legislature prioritizing these bills again, as they will benefit all Michigan residents.”

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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