DETROIT — Gov. Rick Snyder signed legislation Monday that overhauls Blue Cross Blue Shield of Michigan by ending its tax-exempt status, changing how it is regulated and letting it transform into a new nonprofit structure.
The state's largest health insurer expects to begin receiving board approval for the transition in the summer, with the merger of Blue Cross into the new nonprofit structure effective Jan. 1, 2014.
Gregory Sudderth, Blue Cross Blue Shield Michigan's board chairman, described the signing as "the most important day in the 70-year history of this company."
"This is truly a bipartisan document … and a solution with many challenges we faced," he said.
Under the new law, which the Republican signed at a meeting of the company's board of directors in Detroit:
- Blue Cross will pay state and local taxes averaging $100 million annually and no longer be the state's "insurer of last resort," which required it to accept all customers regardless of health status.
- Blue Cross rate increase requests will be reviewed by the state insurance commissioner, as other insurers currently are, and no longer be subject to an extra layer of scrutiny by the Michigan attorney general.
- Blue Cross will shed its charitable "social mission" and commit to contributing nearly $1.6 billion over 18 years to an endowment working to improve public health and health care access.
- From mid-2016 through 2021, $120 million – or nearly $25 million a year – will be disbursed to subsidize Medicare supplemental policies, which fill the gap in Medicare coverage for seniors. Blue Cross now spends about $200 million a year, or 1 percent of revenue, to lower the cost of its Medigap policies.
Supporters say the insurer, which has about 70 percent of the state market, must be modernized as it prepares for the federal health law and to participate in an online exchange where the uninsured can shop for insurance. Senior advocates and Republican Attorney General Bill Schuette, who oppose the law, have warned of sticker shock coming once a rate freeze on Medigap plans for 200,000 seniors ends in 2016.
Snyder and Blue Cross officials stressed that they do not believe the overhauling the insurer will raise rates. They say it will make the organization more competitive and responsive to the market.
"I think it's a good thing for the customers," Snyder said Monday.
In December, Snyder vetoed similar Blue Cross legislation after Republicans added last-minute provisions to prevent insurance plans from covering elective abortions unless women bought a supplemental policy. He also vetoed the measure because rape, incest and the health of the woman were not included in the definition of elective abortions.
Associated Press writer David Eggert in Lansing, Mich. contributed to this report.