Blue Cross Blue Shield of Michigan officials hoped to start the new year with an operational overhaul that included ending its tax-exempt status, changing how it's regulated and transforming itself from a charitable trust to a customer-owned nonprofit. Instead, they're beginning 2013 doing what they did in the final months of 2012: Lobbying state lawmakers and the governor to act.
The state's largest health insurer is back encouraging action on legislation enabling its restructuring after Republican Gov. Rick Snyder vetoed it. Snyder balked last month at the bill he proposed because of language added by lawmakers preventing insurers and businesses from providing elective abortion coverage in employee health plans. Snyder called it an "overreach of government into the private market."
"The veto was disappointing to us," said Blue Cross spokesman Andrew Hetzel. "We also know it was very disappointing to the governor. He vetoed his own plan."
The last-minute language excluding abortions for rape, incest or the health of the woman in the definition of elective abortion and requiring women to buy separate, elective abortion coverage wasn't sought by Snyder or Blue Cross. Both hope the legislation without the abortion provisions will be passed and signed into law early in the legislative session that begins Wednesday.
"You had legislation that was well-developed. It was just a matter of timing that it needed to pass in lame-duck session," said Hetzel, referring to the period between the election and the end of the 96th Legislature. "It just happened to run into a very busy lame-duck session where there were other issues that clearly the Legislature wanted to address."
With lame-duck distractions behind them, Blue Cross' Hetzel said he hopes Snyder and legislative leaders "remain solidly behind" the original legislation.
"We believe we're starting the new year on pretty firm footing," he said.
The proposed reworking of Blue Cross is largely internal: It does away with a law that gives the insurer immunity from paying taxes in exchange for providing insurance coverage regardless of a customer's health status. Another key element is what supporters call regulatory reform and critics call deregulation: Rate-change requests would be reviewed by the state insurance commissioner — as other insurers currently are — and no longer subject to an extra layer of scrutiny by the state attorney general.
Now, the question remains whether the footing is firm enough to pass legislation without the long-sought abortion provisions, particularly in the House where Republicans have a narrower 59-51 edge. Democrats voted against the Blue Cross bills when, on the day they were approved, Republicans began voting on contentious right-to-work legislation that limits unions' power.
"It definitely helped us get (GOP) votes," Rep. Pete Lund, a Republican from Macomb County's Shelby Township, said of the abortion language.
Lund's House Insurance Committee held 16 hours of testimony. Now the 110-member House will have 26 new members who know little about the issue.
"It's not going to be a speedy thing to go and rubber stamp a bill," he said. "This was a complicated issue, and it's going to continue to be complicated."
Both Lund and GOP leaders said they thought Snyder was OK with the legislation when it was sent to his desk. Many were surprised by the veto because unlike other big bills approved in the waning hours of the two-year session, the Blue Cross measure won approval a week earlier. Snyder had time to let it be known he objected.
"It's disappointing anytime you have a bill you put so much time into. That's part of the business. You move forward," Lund said.
Progress could be stymied by other factors. The bills enjoyed support among many business groups, but elderly advocates were critical: The AARP last month warned of a backlash by its membership over legislation that it said would ultimately usher in higher costs for Michigan seniors.
Supporters contend the aim is to level the regulatory playing field for all insurers. The proposed overhaul seeks to modernize but not sell Blue Cross, which is governed by a separate state law from other insurers and typically waits much longer for its rate changes to be reviewed. Streamlining regulations, they say, is particularly important as health insurers gear up for the federal Affordable Care Act and get products and rates ready for an online health exchange where people can compare and buy their own insurance plans.
Blue Cross has been designated the state's insurer of last resort — meaning it must provide insurance coverage regardless of a customer's health status. Because of that, Blue Cross has been exempt from paying several local and state taxes. The measures would require the company to pay those taxes, which Blue Cross estimates will average $100 million annually.
By transforming, Blue Cross also would shed its charitable "social mission" and contribute up to $1.5 billion to a nonprofit foundation carrying on that work. The foundation would work to improve public health and health care access, particularly for children and the elderly. About 60 percent of the money is earmarked in the first four years to subsidize Medigap, which fills the gap in Medicare coverage for seniors, to prevent rates from significantly rising.
Critics say the contribution isn't set in stone and neither is the size of the tax bill after credits are taken into account. They fear that the social mission will be diminished because it doesn't cover what Blue Cross currently contributes to it.
Michigan Consumers for Healthcare Director Don Hazaert recommends that lawmakers pass a one-time waiver for Blue Cross to get its products on the health exchange. To level the playing field, Hazaert also supports "creating a meaningful review process" in the state's insurance office that would "turn inappropriate rates down."
Ed Rivet, legislative director for Right to Life of Michigan, sees an opportunity to recalibrate the conversation in the coming session. He said it wasn't his idea to combine the Blue Cross and abortion provisions together, but nonetheless expects a compromise can be reached with Snyder.
Rivet said a factor causing some confusion could have been the "hurricane known as 'right to work,'" when lawmakers in five days rammed through bills ending requirements that workers pay union dues or fees as a condition of employment.
"It was not an environment conducive to a lot of legislative perfection," Rivet said.