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Michigan Senate OKs Blue Cross overhaul

October 18, 2012
Associated Press

LANSING (AP) - The state Senate moved Michigan's largest health insurer one step closer to an overhaul Wednesday, approving a proposal that includes ending Blue Cross Blue Shield of Michigan's tax-exempt status and aiming to level the playing field between the nonprofit and its rivals.

The Senate passed two related measures by 33-4 votes and the legislation now goes to the House for consideration. The measures are expected to be taken up when the chamber returns after the election.

In exchange for operating as the state's so-called insurer of last resort - meaning it must provide insurance coverage regardless of a customer's health status - Blue Cross has been exempt from paying several local and state taxes. The measures proposed by Republican Gov. Rick Snyder and endorsed by Blue Cross require the company to begin to pay those taxes, which Blue Cross estimates will average $100 million annually, as well as contribute up to $1.5 billion over 18 years to a nonprofit foundation that would take on some of Blue Cross' "social mission" work - improving public health and health care access, particularly for children and the elderly.

Backers say the overhaul is designed to modernize Blue Cross, which is governed by a separate state law from other insurers. They also note the federal health care law scheduled to take effect on Jan. 1, 2014, requires that every insurer offer health insurance regardless of health status.

Blue Cross in Michigan, which serves about 4.4 million residents, wouldn't be sold or lose its nonprofit status but would be regulated in the same way as its competitors. It would join 11 other Blue Cross Blue Shield companies nationwide structured as mutual insurers. Those companies operate in 18 states.

"We had two guiding principles: We remain nonprofit, and the legislation should create a fair and balanced regulatory system where all insurers play by the same rules," Blue Cross spokesman Andy Hetzel said. "This legislation accomplishes that."

Blue Cross officials say the $1.5 billion contribution is an "unprecedented commitment" and one that should provide sufficient funds for the charitable work. But critics including the Consumers Union, the advocacy arm of Consumer Reports, say there is no way to know if it's adequate without performing a more thorough financial evaluation of the deal.

"That's the only way you're going to know how much your charitable organization is worth," Laurie Sobel, a Consumers Union senior attorney, said Tuesday during testimony before the Senate Insurance Committee. "You're at risk of losing billions of dollars or getting it wrong."



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