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BCBSM as a mutual company

September 11, 2012

Earlier this morning Governor Snyder and Blue Cross Blue Shield Michigan announced an agreement that would transition BCBSM to a non-profit mutual insurance company.  The governor and BCBSM expect the transition to be completed prior to January 1, 2014 when many of the key provisions of the Patient Protection and Affordable Care will also begin.

While the announcement was made today, the conversation about a leveling of the playing field for BCBSM and the private insurers and HMOs doing business in the state goes back to many of the arguments that led to Small Group Market Reform.  The agreement would result in BCBSM operating under the same set of insurance rules and regulations as all other carriers and results in a modernization of our State’s insurance regulations.  The Small Business Association of Michigan will advocate for our members as this process unfolds.  Our hope is that the rates our members pay for the health insurance purchased for their employees stabilizes as a result of this agreement.

Please understand that this is not a completed deal as the next steps require the Michigan Senate and House to pass legislation allowing for the transition.  From this morning’s press conference, it is likely that the legislative process will begin in the Senate Insurance Committee Chaired by Senator Joe Hune, and then move to the House Insurance Committee Chaired by Representative Pete Lund.  SBAM has excellent relationships with Senator Hune and Representative Lund and we will participate in those hearings.

Additional details:

  • BCBSM currently operates under Public Act 350 of 1980.  Among other things, it requires BCBSM to be the “insurer of last resort”.  The Affordable Care Act requires all carriers to offer guarantee issue plans, so the concept of BCBSM being the insurer of last resort is rendered moot by the Affordable Care Act.
  • The BCBSM Board of Directors must agree to the transition and the terms of the transition.
  • Across the country there are 11 other BCBS plans operating in 18 states that are also mutual companies, so the structure that Michigan is headed to for BCBSM is not unusual; in fact, what is unusual is the current oversight of PA 350.
  • BCBSM will begin paying premium taxes, state and local taxes that could amount to roughly $100 million/year.
  • Under the agreement, BCBSM will contribute $1.5 billion over 18 years to a separate non-profit organization with an independent Board of Directors that will oversee how that money will be spent. The money is intended to ”fund initiatives that foster healthier lifestyles, provide better access to health care and improve public health”. From our point of view here at SBAM, we intend to weigh in on those discussions as it is our belief that much of the dollars that BCBSM holds in reserve, and would be available for this non-profit, have come from the premiums our members have paid.  At a minimum, we would expect that small business have a seat at the Board table of this new non-profit.
  • BCBSM will remain a Michigan based company.

Governor Snyder and state leaders are hopeful that this transition will result in increased quality and more options for Michigan residents as well as a streamlined set of regulations.  The legislative process is expected to begin immediately and will take place over the next several months.  Because this process will take some time to complete, it is very likely that the outcome of the November election will play a role in how this eventually gets worked out.  

As we have been for the many conversations about the Insurance Exchange, mandated benefits, small group and individual market reform and many other issues impacting the availability and cost of insurance for our members, the Small Business Association of Michigan will be a strong contributor to these discussions representing our members, the small business community overall and those that serve our members.  Our interest in this modernization is that it results in lower cost and higher quality group health insurance options for the small business community.

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