Michigan Attorney General Jennifer Granholm, a Democratic candidate for state governor, vowed to oppose any effort to convert the nation’s largest remaining independent Blues plan--Blue Cross and Blue Shield of Michigan--into a for-profit company, although the insurer itself said it isn’t considering such a move.
Granholm’s comments follow a call by current Gov. John Engler, a Republican, to strengthen state oversight of the Blues’ finances to ensure its charitable obligations are met in the case of a conversion or acquisition. Engler’s proposals would require amending a 1980 law that governs the Blues’ tax-exempt status.
According to Granholm, revising the law could open the door to changing the Michigan Blues’ original charitable mission. She said she is worried Engler and other GOP lawmakers would try to push a bill through the Legislature by early June, but she hasn’t seen any proposed legislation.
Granholm’s move is just the latest roadblock faced by Blues plans potentially looking to go for-profit or to merge with an out-of-state company. Last month, for example, Maryland legislators passed a bill that would require WellPoint Health Networks,Thousand Oaks , Calif., to pay for the state’s CareFirst Blue Cross and Blue Shield plans solely in cash. The legislation could stymie WellPoint’s plans to acquire the not-for-profit insurer in Owings Mills for a combined $1.3 billion in cash and stock.
With 4.8 million members and $10.4 billion in 2000 revenue, the Michigan Blues, based in Lansing, is not only the country’s largest remaining independent Blues plan but also the state’s largest insurer.
“Any step that would take the Blues closer to becoming a for-profit company is a step backward for healthcare in this state,” Granholm said in a written statement. “This issue is much too important … to be rammed through in a summer-shortened or lame duck legislative session. It took two years of careful, deliberate work to update the Blues’ enabling legislation in 1980; undoing its unique standing as a benevolent organization in 12 days is a dangerous mistake.”
A state audit last September determined that the Michigan Blues’ long-term solvency is threatened by serious problems, including $400 million in losses in the small-group market over the past five years, archaic technology and a cumbersome board and management structure.
For its part, the Michigan Blues contends that it has no plans to go for-profit.
Instead, it’s asking Michigan to join 40 other states that have enacted laws that prevent commercial insurers from “cherry-picking” young, healthy employees for coverage, leaving the Blues with a less healthy--and more costly--risk pool. Under the 1980 state law, the Blues is required to accept all customers regardless of age or health status.
The Michigan Blues, however, opposes changes to its board or the creation of a charitable trust. Its 35-member board has representation from companies, unions, providers and stakeholders throughout the state; to change the board’s composition to a majority of governor appointees would constitute a taking of a private, not-for-profit company, the Blues contends.