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Blue Cross Blue Shield of Michigan Conversion Bills Signed into Law

BCBS logoWhile many thought the Blue Cross Blue Shield of Michigan ("BCBSM") conversion bills would be signed into law at the end of 2012, it was not until March 18, 2013 that Governor Snyder signed the proposed legislation into law. The BCBSM conversion bills convert BCBSM from "a tax exempt charitable and benevolent institution" into a nonprofit mutual health insurance company. BCBSM has been operating as a tax-exempt nonprofit since Public Act 350 was signed into law in 1980. (This Public Act is referred to as the previous BCBSM statute.) The previous BCBSM statute made BCBSM Michigan’s “insurer of last resort,” requiring it to accept all customers regardless of their health.

The new laws, Public Act 4 of 2013 and Public Act 5 of 2013, will result in BCBSM paying approximately $100 million in state and local taxes annually, and require BCBSM to contribute approximately $1.5 billion over the course of 18 years (beginning in 2014) into the new Michigan Health Endowment Fund. The Michigan Health Endowment Fund is designed to promote health and wellness by, among other things, allocating $120 million to subsidies payments for seniors' Medigap coverage.

In addition, BCBSM's “most favored nation” clauses in contracts with providers – which require providers to stipulate that no insurance companies can obtain better rates from the providers than BCBSM – are prohibited by the new laws. BCBSM will also now be treated like other insurers and HMOs in Michigan when it comes to oversight, which will be less strict. One such way in which BCBSM's oversight will be less strict concerns patient and provider appeals. The new laws do not provide any specific appeal rights, which is different than the previous BCBSM statute. This has been a cause of concern for those opposed to the new laws.

BCBSM’s conversion should be complete by the end of this year, to coincide with the full implementation of the Patient Protection and Affordable Care Act ("PPACA") in January 2014. According to Crain's Detroit Business, BCBSM’s board approved (subject to Governor Snyder’s signature) BCBSM’s conversion and restructuring in accordance with the new laws on February 28, 2013.

BCBSM CEO Dan Loepp expressed optimism to the Detroit Free Press that the overhaul would benefit the company and consumers, stating “I think that we would be able to be a more nimble company, which should allow us to offer different products and more competitive products. This will be more competitive and more advantageous for consumers.”

We will continue to monitor and provide updates on BCBSM’s conversion, the impact of the new laws, and effects on the health insurance marketplace more broadly, particularly in light of the implementation of the PPACA over the course of the next year.

Categories: Health Care Reform, Insurance, Regulatory

Photo of Gary J. McRay

Gary has nearly 40 years of experience and has earned a reputation for handling sophisticated transactions for hospitals, managed care organizations, HMOs, health insurers, physician groups and other provider entities and for helping his clients stay on top of complex regulatory issues, such as Anti-Kickback Statute, Stark II, Medicare, Medicaid, and BCBSM reimbursement appeals. 

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Best Lawyers® 2020

Congratulations to the attorneys of the Health Care practice group at Foster Swift Collins & Smith, PC for their inclusion in the Best Lawyers in America 2020 edition. Firm-wide, 42 lawyers were listed. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation and as lawyers are not required or allowed to pay a fee to be listed; inclusion in Best Lawyers is considered a singular honor. Health Care practice group members listed in Best Lawyers are as follows:

To see the full list of Foster Swift attorneys listed in Best Lawyers 2020, click here.