Two months after vetoing the bills because of abortion restrictions, Michigan Gov. Rick Snyder signed two bills to allow Blue Cross and Blue Shield of Michigan to convert into a not-for-profit mutual health insurance company, pay an estimated $100 million in annual state and local taxes and, ultimately, create a $1.56 billion community foundation.
“This is a big day for Michigan because Blue Cross is a critically important company and plays a big role for Michiganders,” Snyder said. Blue Cross has been operating as the “insurer of last resort” under Public Act 350 since 1980, he noted. “Every 30 or 40 years, it is a good idea” to update laws and regulations, Snyder said with a smile.
At Blue Cross headquarters in Detroit, more than 100 politicians, government officials, Blue Cross executives and board members, the invited public and media gathered to witness the bill-signing ceremony.
While the Blue Cross legislative package took more than six months to pass through the Legislature, CEO Dan Loepp said talks with Snyder actually go back more than 2½ years.
“When you work with great legislators in a bipartisan way, you can get things done,” Loepp said. “The end result is terrific, and the board has empowered us to get this done.”
Last December, Snyder was forced to veto similar legislation because some Republican legislators inserted language at the last minute that would have restricted insurance providers and businesses from providing elective abortion coverage in employee health plans. Many policies cover abortion services.
But Sens. Joe Hune, the Republican chair of the Senate Insurance Committee, and Virgil Smith, a Democrat, sponsored revised bills that sailed through the Legislature this year without abortion language.
Gregory Sudderth, chairman of Blue Cross' board, said the Blues' board approved the enabling legislation Feb. 28, contingent on the governor's expected signing.
If Blue Cross is sold or wants to change its not-for-profit corporate structure, the legislation also requires legislative approval and for Blue Cross to pay into the community foundation the greater amount of either the acquisition price or the company's fair market value as of that time, a Blue Cross statement said.
Over 18 years beginning in 2014, Blue Cross will contribute $1.56 billion into the Michigan Health Endowment Fund to promote health. The foundation will provide funding for wellness and preventive care services.
The foundation also will provide $120 million to subsidize payments for seniors' Medigap coverage. Critics say that is far below the estimated $180 million annual amount Blue Cross currently subsidizes. However, those dollars came from taxes on self-insurance businesses.
“This will protect seniors for many years to come,” Hune said.
Michigan Attorney General Bill Schuette criticized the legislation and said it will be insufficient to help seniors pay for Medigap, or Medicare supplemental policies, after 2016.
In a settlement two years ago, Schuette negotiated a requirement that Blue Cross continue its current subsidies until 2016, when the foundation would then subsidize premiums by about $24 million a year.
Over the next several months, Blue Cross' board will begin a series of steps to form the new mutual insurer, Sudderth said. The process will include creating a governance structure, filing articles of incorporation, submitting a plan of merger for regulatory approval and then merging Blue Cross into the new not-for-profit mutual company.
The insurance company expects to be done with the conversion by the end of the year, Sudderth said.
Blue Cross is expected to identify other operational changes needed to comply with the Michigan Insurance Code and the Patient Protection and Affordable Care Act.
“Changes required to become a mutual insurance company will be small in scope compared to the changes we have been and will be implementing to conform to the federal health reform law,” Loepp said in a statement.
—Crain's Detroit Business