2011-2012 Legislators Guide to Michigan’s Insurance Issues

Blue Cross and Blue Shield of Michigan (BCBSM)

DISCUSSION

Blue Cross Blue Shield of Michigan (BCBSM) is not a commercial insurance company, it is a non-profit health care corporation formed under Act 350 of 1980. The intent, purpose and mission of a non-profit health care corporation created under the Act is to improve the general health, safety, and welfare of the people of Michigan by providing access to reasonably priced and good quality health care services. The Blues are the only non-profit health care corporation formed under this Act.

Because of its special mission to carry out the public policy of the state, the non-profit corporation created under this Act was declared to be a charitable and benevolent institution, and was originally granted an exemption from state and local taxes. Because its commercial activities disqualified it from the requirements for its federal charitable exemptions, it now has to pay federal taxes. Given the Act’s stated intent, the purposes of BCBSM were, not surprisingly, limited to health care and health care benefits.

Its unique status has given BCBSM near-monopoly power in the Michigan health-care benefits market, which has allowed it to develop very favorable contracts with networks of health care providers. It currently competes with commercial insurance companies, which have been nearly squeezed out of the Michigan marketplace.

By law, the funds and property of BCBSM is to be used only for the purposes for which it was formed and for the benefit of its subscribers. The purposes of BCBSM were amended narrowly in the early 1990s to allow it to bid to purchase the state workers compensation fund (The Accident Fund). This was done not because it was felt that The Accident Fund fit within the purpose of BCBSM, but because of the state’s interest in obtaining the highest possible price for the sale of the fund.

MIC’s POSITION

MIC recognizes that BCBSM, as originally conceived and authorized, responded to perceived needs in the marketplace at that time. BCBSM’s growth and market dominance have been breathtaking, yet public policy discussions in Michigan seem to pay short shrift to its impact to the competitive market – this at a time when many, perhaps most, Blues plans have been reformed or privatized. MIC will generally not involve itself in public policy discussions concerning the market segment BCBSM occupies, but since its operations now include property and casualty companies, that has proven difficult.

RELATED REFERENCES/RESOURCES

  • The Non-Profit Health Care Corporation Reform Act or PA 350. MCL 550.1101 et seq.