Gov. Rick Snyder announces sweeping changes to how Michigan’s largest health insurance provider is regulated at a press conference, Tues. Sept. 11. 2012. Snyder called for Blue Cross to become a nonprofit mutual insurance company that is regulated under the Michigan Insurance Code like all other health insurers in the state. State Department of Community Health Director Jim Haveman (pictured left) and other officials were on hand for the announcement.
Governor proposes regulatory overhaul for Blue Cross; investment of about $1.5 billion to improve public health Gov. Rick Snyder today proposed sweeping changes to how Michigan’s largest health insurance provider is regulated, calling for it to become a nonprofit mutual insurance company that is regulated under the Michigan Insurance Code like all other health insurers in the state. The governor’s plan requires Blue Cross Blue Shield of Michigan to contribute about $1.5 billion over 18 years to a new nonprofit entity whose purpose is to fund initiatives that foster healthier lifestyles, provide better access to health care and improve public health. This is an unprecedented investment in the health and wellness of Michigan families. “This is an exciting opportunity to improve the health of Michiganders and create a modernized, efficient health care marketplace that spurs innovation and streamlines outdated regulations,” Snyder said. “It’s especially important that we have a system that promotes wellness for our children and seniors. This proposal will ensure that quality health care remains affordable and accessible for everyone.” Snyder’s plan, which requires approval by the Legislature and the Blue Cross board of directors, follows his call in last year’s Special Message to the Legislature on Health and Wellness to reinvent health care in Michigan so it can be a positive economic driver of the state’s ongoing recovery. Specifically, the governor’s plan will:
• Create a nonprofit entity to improve the health of all Michigan residents. The nonprofit will be run by an independent board of directors. It will be funded with about $1.5 billion in contributions from Blue Cross made over the next 18 years.
• Blue Cross will transition to a nonprofit mutual insurance company that will pay an estimated $100 million a year in additional tax revenue to the state and local governments.
• Protect senior citizens by freezing “Medigap” coverage rates for four years.
• Streamline the regulatory environment by regulating Blue Cross under the state Insurance Code, as is the case with all other health insurance companies.
• Preserve Blue Cross’ nonprofit status and mission while maintaining its tremendous contribution to Michigan’s economy and investments in the state.
• Eliminate the “tax” currently required on Blue Cross’ small-business and individual customers to subsidize other lines of insurance coverage. That tax costs small businesses and individual Blue Cross members more than $200 million a year.
• Ensure that Blue Cross continues as a carrier of last resort until Jan. 1, 2014, at which time new federal laws will require all insurers to offer coverage to anyone regardless of health status. With 4.4 million Michigan subscribers, Blue Cross Blue Shield is the state’s largest health insurance provider. Unlike other insurance companies, which are regulated under the state Insurance Code, Blue Cross is regulated by Public Act 350 of 1980. That law was created to designate Blue Cross as the health insurance “carrier of last resort” and ensure that everyone has access to health insurance regardless of health status. Snyder said recent reforms have rendered P.A. 350 obsolete and require Michigan to have a uniform set of regulations for all insurers. “The old way of doing business doesn’t meet Michigan’s demands today for a competitive and efficient health care system,” Snyder said. “Michigan needs a new regulatory environment that continues our reinvention and allows us to attract the kind of investment that will fuel our comeback. This proposal will help us do that.”
CEO Daniel J. Loepp: Gov. Snyder’s plan preserves Blues’ mission, commitment to Michigan
This is a time of unprecedented transformation in healthcare. Significant changes are coming soon in how people purchase their health insurance and how insurers, like Blue Cross Blue Shield of Michigan, provide it. Everyone has ongoing questions about cost and quality within our healthcare system, and about whether those issues can be resolved. It’s time that leaders across the spectrum step forward to give Michigan the best possible chance for success in the future. To do this, however, it’s necessary to change some of those things that have defined the past.
On Sept. 11, Gov. Rick Snyder offered a proposal that he believes sets Michigan up for success. At the heart of his proposal are two fundamental concepts: The best health insurance system for Michigan is one where all insurance companies play by the same rules. The nonprofit mission of Blue Cross should be sustained to protect health care access, affordability and quality for all of Michigan’s people. While the governor’s plan isn’t exactly what Blue Cross would have proposed, it does contain some fundamental ideas that we agree are necessary for Michigan.
First, our regulations need to be consistent. For more than 30 years, Michigan has regulated its health insurance market using a hodgepodge of different rules. Commercial health insurance companies, nonprofit HMOs and Blue Cross are all regulated under different laws. Some companies pay taxes and some do not. Blue Cross serves as “insurer of last resort,” offering policies to anyone regardless of their health condition — while all other insurers and HMOs are allowed to reject applicants for their health.
Blue Cross’ rates are subject to strict state oversight, while other carriers’ rates are not subject to the same strict review processes. Imagine if food was regulated this way, with rules written for some companies but not for others. Would you be confident that your family’s dinner was ever safe to eat? The governor’s plan cleans up this mess. It regulates all health insurance companies under the same law with the same rules. This will give Michigan health insurance consumers the confidence that the coverage they buy will be governed by the same standards, whichever company provides it.
Next, the governor’s plan recognizes Blue Cross’ legacy in Michigan of giving back as a nonprofit corporation. It sustains our nonprofit status. But it transitions Blue Cross’ contributions to focus on building a better, stronger Michigan in the future, rather than supporting policy objectives that were defined for us way back in 1980 — when everything was different. For those past 32 years, Blue Cross has been known as the “insurer of last resort.” But with federal reforms, all insurers will be required to cover everyone beginning Jan. 1, 2014.
This makes Blue Cross’ role outmoded. The solution is to make the Blues’ mission and our contributions right for the times we live in today, and for the future. The governor proposes an unprecedented contribution toward the future health of Michigan’s people, and in promoting access to health care and ways to keep it affordable. Blue Cross would contribute approximately $1.5 billion over the next 18 years to this effort. It would be managed not by the Blues, but through a nonprofit organization created by the state and informed by a community advisory council to invest in better health for the people of Michigan. Our contribution of approximately $1.5 billion would be about 25 times more than any other nonprofit Blues plan has contributed following its transition to a nonprofit mutual structure.
The governor’s proposal requires change on the part of Blue Cross, including paying state and local taxes for the first time — to the tune of about $100 million a year. But it does move our state forward by ensuring a modern regulatory system, respecting that federal law has strengthened consumer protections. Gov. Snyder also preserves what’s best about Blue Cross — our nonprofit mission and our unwavering commitment to Michigan. Through our continued social mission contributions, the Blues will remain a vital force in improving the quality and protecting the affordability of health care for everyone who calls Michigan home.
Daniel J. Loepp is president and chief executive officer of Blue Cross Blue Shield of Michigan.