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Governor Proposes Regulatory Reform for Blue Cross

courtesy Governor Snyder

Gov. Rick Snyder today proposed sweeping changes to how Michigan’s largest health insurance provider is regulated, calling for it to become a nonprofit mutual insurance company that is regulated under the Michigan Insurance Code like all other health insurers in the state.

The governor’s plan requires Blue Cross Blue Shield of Michigan to contribute about $1.5 billion over 18 years to a new nonprofit entity whose purpose is to fund initiatives that foster healthier lifestyles, provide better access to health care and improve public health. This is an unprecedented investment in the health and wellness of Michigan families.

“This is an exciting opportunity to improve the health of Michiganders and create a modernized, efficient health care marketplace that spurs innovation and streamlines outdated regulations,” Snyder said. “It’s especially important that we have a system that promotes wellness for our children and seniors. This proposal will ensure that quality health care remains affordable and accessible for everyone.”

Snyder’s plan, which requires approval by the Legislature and the Blue Cross board of directors, follows his call in last year’s Special Message to the Legislature on Health and Wellness to reinvent health care in Michigan so it can be a positive economic driver of the state’s ongoing recovery.

Specifically, the governor’s plan will:

  • Create a nonprofit entity to improve the health of all Michigan residents. The nonprofit will be run by an independent board of directors. It will be funded with about $1.5 billion in contributions from Blue Cross made over the next 18 years.
  • Blue Cross will transition to a nonprofit mutual insurance company that will pay an estimated $100 million a year in additional tax revenue to the state and local governments.
  • Protect senior citizens by freezing “Medigap” coverage rates for four years.
  • Streamline the regulatory environment by regulating Blue Cross under the state Insurance Code, as is the case with all other health insurance companies.
  • Preserve Blue Cross’ nonprofit status and mission while maintaining its tremendous contribution to Michigan’s economy and investments in the state.
  • Eliminate the “tax” currently required on Blue Cross’ small-business and individual customers to subsidize other lines of insurance coverage. That tax costs small businesses and individual Blue Cross members more than $200 million a year.
  • Ensure that Blue Cross continues as a carrier of last resort until Jan. 1, 2014, at which time new federal laws will require all insurers to offer coverage to anyone regardless of health status.

With 4.4 million Michigan subscribers, Blue Cross Blue Shield is the state’s largest health insurance provider. Unlike other insurance companies, which are regulated under the state Insurance Code, Blue Cross is regulated by Public Act 350 of 1980. That law was created to designate Blue Cross as the health insurance “carrier of last resort” and ensure that everyone has access to health insurance regardless of health status. Snyder said recent reforms have rendered P.A. 350 obsolete and require Michigan to have a uniform set of regulations for all insurers.

“The old way of doing business doesn’t meet Michigan’s demands today for a competitive and efficient health care 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.”



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