Health Care Law Blog

Governor Snyder Proposes Total Overhaul to Blue Cross Blue Shield of Michigan

Governor Rick Snyder in a press conference this morning proposed a total overhaul of Blue Cross Blue Shield of Michigan ("BCBSM").  Governor Snyder's proposal would:

1. covert BCBSM to a non-profit mutual company;
2. end its tax exemption; and
3. remove Attorney General review of requested rates. 

In essence, Michigan would treat BCBSM as it would any other health insurer as BCBSM would be regulated by the Insurance Code.  While this proposal may seem drastic, it is not surprising given recent regulation orders by the Office of Financial and Insurance Regulation ("OFIR") curtailing BCBSM's use of most favored nation clauses ("MFN Clauses") and rejecting the low rates that it charges to hospitals and other providers.

Specifically, in mid-July, OFIR issued an order prohibiting the use of most favored nation ("MFN") clauses in insurer provider contracts, including those used by BCBSM as of February 1, 2013, unless the MFN clause had been filed with and previously approved by the Insurance Commissioner.  Any attempt to enforce an MFN without the Commissioner's prior approval was prohibited and would result in appropriate administrative action.  Also in July of this year, OFIR rejected BCBSM's proposed hospital provider class plan (and the rates it pays to hospitals) because BCBSM failed to recognize government shortfalls related to Medicare and Medicaid in its reimbursement methodology.  This in effect resulted in BCBSM underpaying hospital providers and allowing other health care insurers or purchasers to bear portions of BCBSM's fair share of reasonable costs to hospitals.  These regulatory handcuffs would be augmented by an entirely new legislative scheme that would treat BCBSM as any other insurer in the State of Michigan.

Governor Snyder hopes to have this legislation passed before year end.  However, the Attorney General oversight of the Governor's proposal would end after a four year transition.

Categories: Hospitals, Insurance, Physicians, Regulatory