Michigan's attorney general has filed a lawsuit against Blue Cross and Blue Shield of Michigan, alleging that the not-for-profit insurer illegally used subscriber funds to purchase a for-profit subsidiary.
Michigan Attorney General Mike Cox says that the Michigan Blues transferred $125 million to the Accident Fund, a subsidiary, in November 2007, and then used those funds to purchase CompWest Insurance Co., a for-profit workers' compensation firm in California, that same month for $127 million.
Helen Stojic, spokeswoman for Blue Cross and Blue Shield of Michigan, said the insurer strongly disagrees with the lawsuit, adding that Accident Fund obtained prior regulatory approval for the transaction and that the Blues subsidiaries are a stabilizing influence on members health insurance rates.
State law prohibits the Michigan Blues from using its own revenue toward the Accident Fund's activities. Cox is asking the court to require the Blues, the state's largest insurer, to divest the California firm or recover the $125 million.
Michigan consumers shouldn't "have to pay higher healthcare premiums so Blue Cross can go on a spending spree and grab up for-profit insurance companies," Cox said in a written statement. -- by Rebecca Vesely