LANSING (AP) — Gov. Rick Snyder on Tuesday proposed overhauling Blue Cross and Blue Shield of Michigan by ending the nonprofit health insurer's tax-exempt status and aligning it with competitors across the state.
The Republican governor said during a news conference in Lansing that he wants to "level the playing field" for insurers and modernize Michigan's insurer of last resort, which serves 4.4 million residents.
Blue Cross would not be sold or lose its nonprofit status. Instead, it would become an organization owned by its policyholders and regulated in the same way as many of its competitors.
The plan would require Blue Cross to contribute about $1.5 billion over 18 years to a nonprofit entity aimed at improving public health and health care access. It would pay about $100 million in taxes.
Blue Cross in Michigan would join 11 other Blue Cross Blue Shield companies nationwide structured as so-called mutual insurers, and those companies operate in 18 states.
Changing how the state regulates Blue Cross has been among Snyder's goals, and he included it in a special message last September to the Legislature on health and wellness. He said Blue Cross is specifically regulated by a law that's more than 30 years old and doesn't take into account many changes in the health care industry.
"Times have changed," Snyder said. "If you look at where federal law ... is going in terms of health care, it's getting much more to an open marketplace, where under federal law insurance companies will be required to provide insurance to individuals regardless of their health conditions. So this is an excellent opportunity for us to say we should update ... to keep up with that."
The plan requires approval by the Legislature and Blue Cross' board of directors. Snyder and Blue Cross leaders say they have been in discussions for months regarding the proposals, which would take effect Jan. 1, 2014, at the same time as key provisions in the federal Affordable Care Act.
Snyder is optimistic Blue Cross in Michigan can be restructured despite his failure to persuade legislators to create a state-run online health exchange for people to compare and buy their own insurance plans. Such a plan, whether run by the state, federal government or jointly, is required under the federal health care act.
After months of efforts to get fellow GOP leaders in the Michigan House of Representatives to approve a state-driven exchange, Snyder said last month that Michigan will pursue a partnership.
Blue Cross officials said in a statement that it's "not exactly" what it would have proposed, but it creates a "fair and balanced set of rules of health insurance."
"Regulating every company the same makes sense," Blue Cross of Michigan President and Chief Executive Daniel Loepp said. "Our competitors complain that our tax-exempt status gives us a competitive edge, and we say that our strict regulations give them an edge. The governor's proposal smooths out those edges. It makes everyone play by the same rules."
Shelby Township Republican Rep. Peter Lund, chairman of the House Insurance Committee, said he is confident lawmakers can "get something done," but he first has "a lot of questions" and expects to look closely at the details during committee hearings.
No final action is expected before the Nov. 6 election. The Legislature, which returned Tuesday for its first week of sessions since June, has only eight sessions scheduled between now and then.