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Mich. Legislature OKs Blue Cross conversion bills

With some last-minute tweaks, the Michigan Legislature approved two bills to allow Blue Cross Blue Shield of Michigan to convert to a tax-paying, not-for-profit mutual health insurer.

Gov. Rick Snyder, who has championed the Blues' conversion, is expected to sign the bills.

Dan Loepp, CEO of Blue Cross, said the legislation is fair and will allow Blue Cross to help fund health care programs and continue its mission in Michigan.

"It enables Blue Cross to contribute in significant ways to a healthier Michigan, gives the Blues and our competitors a level and competitive playing field and addresses concerns of those who depend on Blue Cross' longstanding contributions as a nonprofit company," Loepp said in a statement.

Rick Murdock, executive director of the Michigan Association of Health Plans, which includes many of Blue Cross' competitors, said amendments to the original legislation will benefit consumers.

Some changes included:

A ban on "most favored nation" clauses in contracts between hospitals and health insurers.

A requirement that Blue Cross contribute a "fair share" of reimbursement to hospitals to account for underfunded government programs and uncompensated care.

Shortly after the Blue Cross board approves the conversion, Blue Cross will be regulated under state insurance code as its competitors are.

Under the legislative package, Blue Cross will be required to contribute $1.56 billion into a nonprofit foundation over 18 years and pay about $100 million annually in state and local taxes.

The legislation requires the state Legislature to approve any subsequent purchase or conversion into a for-profit entity and the people of Michigan to benefit from any sale.

"We now look forward to working with Gov. Snyder's administration to implement these changes as we continue to develop more affordable health care options for the citizens of Michigan," Murdock said in a statement.

But Jacqueline Morrison, director of AARP Michigan, said the final bill will hurt low-income seniors once state-mandated subsidies for Medigap supplemental insurance coverage ends in July 2016.

"We are disappointed the majority of legislators turned their backs on older Michiganders when they voted in favor of two bills that will take at least $876 a year out of the pockets of approximately 176,000 seniors who will pay higher Medigap premiums as of 2016," Morrison said in a statement.

"AARP Michigan will notify our 1.4 million members to let them know how their senators and representatives voted on this legislation that will have a negative financial impact on many seniors, who are already burdened by a new pension tax and other recently enacted tax changes," Morrison said.

Primarily because the bill did not go far enough in providing subsidies for Medigap coverage, Attorney General Bill Schuette withheld support.

In a statement, Michigan Consumers for Healthcare said if the legislative package approved by the House becomes law, health insurance premiums will skyrocket for individuals and small businesses in Michigan.

"While the Michigan House should be applauded for making some substantive improvements, this deregulation scheme still reduces access to coverage and effectively guarantees skyrocketing insurance premiums for individuals and small businesses," said Don Hazaert, director of Michigan Consumers.

"This deal eliminates all meaningful rate review on Blue Cross going forward and effectively allows a monopoly to set insurance rates in Michigan. The public will not accept the Legislature abandoning the state's rate review responsibilities simply for the sake of political expediency."

For 32 years, Blue Cross has been regulated under Public Act 350 as a "charitable and benevolent" company and held in trust for the people of Michigan.

But experts contended Blue Cross' mission had to change when the Patient Protection and Affordable Care Act goes into full effect on Jan. 1, 2014.

Under reform, all insurers — not just Blue Cross — must offer policies to people with pre-existing health conditions.

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