Workers' compensation insurers are seeking a court order this week to derail Blue Cross and Blue Shield of Michigan's bid to acquire the State Accident Fund, the state-owned workers' compensation insurer.
If the $291 million cash deal occurs, the Michigan organization would be one of the few Blues plans that own workers' compensation insurers, though Blues in several states have alliances with workers' compensation insurers.
The Michigan plan said it is confident that it can curb the State Accident Fund's workers' compensation healthcare costs, which approach 50% of expenses. The arrangement would also better position both organizations for healthcare reform and the development of 24-hour coverage programs, Blues executives said.
But insurers argue that the Michigan plan is not paying enough for the fund, considering the Blues' special tax advantage as a not-for-profit organization.
After the Legislature authorized the sale of the State Accident Fund, which writes $200 million in annual premiums, the State Administrative Board chose Blue Cross as the preferred bidder. The Blues plan bid $291 million in cash. It would pay an addition $3.5 million to $4 million as a business tax on the purchase, based on the state treasurer's calculations.
A lawsuit filed in Ingham County Circuit Court by Michigan Mutual Insurance Co. and other insurers calls on the treasurer to recalculate the tax. "Insurance companies believe the tax should be between $40 million and $100 million," said Richard Zapala, an assistant in the state attorney general's office.