Blue Cross overhaul makes headway, raises concerns

Associated Press Modified: November 17, 2012 at 7:32 am •  Published: November 17, 2012

The $1.5 billion represents half of Blue Cross' book value — the organization's assets minus liabilities. Some have been calling for a full financial valuation, saying it would provide a more accurate picture of its worth.

Michigan Attorney General Bill Schuette has opposed various parts of the legislation during the past two months and successfully lobbied to get the extended subsidies for eligible seniors, among other things, into the Senate bills. This past week, officials from his office argued for the first time publicly that the specific language creating the foundation needs to be much tighter and it should be set up so the Internal Revenue Service doesn't see it as "self-dealing" when Blue Cross — a major supplier of Medigap coverage — receives subsidies from the nonprofit.

Mark Cook, Blue Cross' vice president of governmental affairs, said at a hearing Tuesday that the intention of the legislation is clear to Blue Cross, which plans to make annual payments. He said the insurer is "open to more language" provided it's not forced to make that $1.5 billion payment at one time.

Also, he said, what some call "social assets" paid by Blue Cross in Michigan are viewed by the organization as losses. Blue Cross reported about $300 million in losses last year related to the subsidies it pays for Medigap and money it loses on individual insurance products "because we tend to get the sicker folks."

"There is not a social asset meter that accrues to the state," he said. "There are individuals who benefit from our losses."

Ultimately, Cook said the legislation is "not what we would have proposed," but the company supports it. He said Snyder "wanted to go larger" and create uniformity in the insurance system, so he called for a review of the 32-year-old public act that pertains to Blue Cross, which led to the proposal he announced in September to do away with it.

"A member with a Blue Cross card in their pocket will see no change," Cook said. "It's simply a different governance structure."

Regardless, any large internal change to an insurer with 4.4 million customers representing 70 percent of the market is going to raise concerns and should be scrutinized, said Allen Goodman, an economics professor at Detroit's Wayne State University.

"It seems to me that it scares people a little bit. You've always had Blue Cross. It's always been a big corporation, and it's always been nonprofit," he said. "People think of the Blues as being a monolith. ... It's a very valuable franchise."


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