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Mich. panel discusses Blue Cross overhaul plan

The Michigan Legislature took its first steps Wednesday toward tackling a proposed overhaul of the state's largest health insurer, Blue Cross Blue Shield of Michigan.

Senate Insurance Committee Chairman Joe Hune introduced bills that would end the nonprofit health insurer's tax-exempt status and align it with competitors. The proposals come at the recommendation of Republican Gov. Rick Snyder, who said last week he aims to “level the playing field” for insurers and modernize the only Michigan company that has to provide insurance coverage regardless of a customer's health status.

In exchange for operating as the state's so-called insurer of last resort, the charitable trust that serves about 4.4 million Michigan residents has saved about $100 million in local and state taxes annually. Under the legislation, Blue Cross would pay those taxes and contribute about $1.5 billion over 18 years to a nonprofit entity that would take on some of Blue Cross' “social mission” work — improving public health and health care access, particularly for children and the elderly.

Blue Cross in Michigan wouldn't be sold or lose its nonprofit status but would become owned by policyholders. It would join 11 other Blue Cross Blue Shield companies nationwide structured as mutual insurers, and those companies operate in 18 states.

Commissioner R. Kevin Clinton of the Michigan Office of Financial and Insurance Regulation told the Senate panel that the federal Affordable Care Act, which takes effect Jan. 1, 2014, requires that every insurer offer health insurance regardless of health status. But the act also calls for the creation of online health exchanges for people to compare and buy their own insurance plans.

“We have to get this done on a timely basis to get the Blues on the exchange,” Clinton said.

Clinton said state officials don't expect any rate increases because of the reorganization, based on a review of the conversions of other Blue Cross Blue Shield companies.

State officials would seek an opinion from an outside firm to confirm that the proposal is fair to Michigan residents. Clinton said such a “fairness opinion” is different from a financial evaluation, which is done to get a fair-market value of a company before a sale.

The plan requires approval by the Legislature and Blue Cross' board of directors. Blue Cross officials said in a statement last week that Snyder's proposal isn't exactly what it would have crafted but that it creates a “fair and balanced set of rules of health insurance.”

The Senate insurance panel on Thursday is scheduled hold another hearing to discuss the proposal.

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