What Consumers Need to Know about the Blue Cross Deal

What you need to know about the Blue Cross Deal

Consumers Explain What is REALLY Going On

So how do Senate Bills (SB) 1293 and 1294 dealing with the sale of Blue Cross Blue Shield of Michigan (Blue Cross) impact consumers, taxpayers and the business community?  Michigan Consumers for Healthcare explains:

This deal reduces overall social mission spending by over $300 million annually

Blue Cross’ own analysis states it spends “at least $391 million” annually on social mission spending but this deal reduces that to an average of $83 million for 18 years.  There is no plan to replace the lost $300 million per year nor any study conducted as to how healthcare will be impacted in our state.

This deal deregulates a monopoly; consumers and small businesses will risk higher premiums

Blue Cross is a functional monopoly controlling 70% of the commercial insurance market yet this bill would remove all Attorney General rate-setting oversight.  Rather than “level the playing field” by requiring all insurers undergo meaningful rate review, this bill allows all premium rate increases to automatically go into effect under what are called “file and use” rules.

This deal transforms Blue Cross into a Mutual/For-Profit hybrid

These bills provide no limits on the creation of stock subsidiaries or the amount of business Blue Cross Mutual could place in for-profit subsidiaries.   This means the new company can function as a Mutual/For-Profit hybrid immediately issuing stock through subsidiaries and creating lucrative stock options for executives, all without properly compensating taxpayers whose money Blue Cross will be using.

This deal abuses taxpayers; could pay them less than $500 million for an asset worth up to $10 billion

As the Center for Insurance Research demonstrated, taxpayers could be compensated with less than $500 million in today’s dollars for a public, charitable asset worth between $6 billion and $10 billion.  Paying taxpayers nothing is even a possibility as the language in the bill is unenforceable in its use of terms like “contributions,” “up to” $1.5 billion, and “best efforts” to pay.

This deal allows Blue Cross to pay far less in taxes than promised

Because the deal intentionally classifies Blue Cross Mutual payments as “contributions,” the mutual can deduct these payments from future taxes.  This means taxpayers are self-funding a third of Blue Cross Mutual’s payments. Taxpayers may have to wait up to 18 years (when proposed payments end) before they see the boost in state tax revenue promised in the initial press releases.

This deal needlessly asks taxpayers to defer fair market value compensation

As the current language allows Blue Cross Mutual to function as a de facto for-profit entity through its subsidiaries, there is no reason for taxpayers to defer compensation until a later resale.  Fair compensation based on an exchange of guarantee stock- which is how mutuals have been funded for 150 years- would allow taxpayers immediate compensation while providing Blue Cross Mutual the capital to operate.

This deal gives Blue Cross billions in “free capital” to drive competitors out of the marketplace

Blue Cross is already a functional monopoly and by handing the company billions of dollars in “free capital” (ie…legislatively forfeited taxpayer assets), Blue Cross Mutual will be unfairly and uniquely subsidized and will have the war chest to drive competitors out of any market of its choosing. This denies consumers the pricing competition they need and destabilizes the insurance market.

This deal robs Blue Cross policyholders of their property rights

These bills would deny Blue Cross policyholders of their property rights by stripping them of all rights to dividends or any value policyholders contribute to the new company going forward.

This deal will allow denial of Medigap coverage due to pre-existing conditions

The “must issue” provisions of the Affordable Care Act do not apply to secondary insurance like Medicare Medigap policies.  Therefore, this deal allows for all insurers to eventually deny all older adults or persons with disabilities Medigap coverage due to pre-existing conditions.

There is no such thing as a “non-profit mutual” in Michigan

Michigan law recognizes only three categories of insurer ownership — non-profit, owned by the community; mutual, owned by policyholders; and for-profit, owned by shareholders.  Blue Cross’ own materials claim the company will be a mutual insurance company owned by policyholders (not by the community).

RESOURCES:

You may read the Center for Insurance Research’s opinion analysis of SB 1293 and SB 1294 at:

http://consumersforhealthcare.org/blog/center-insurance-research-slams-blue-cross-blue-shield-bills-latest-comments

You may read Michigan Consumers for Healthcare’s letter to the Michigan Senate opposing the fast-tracking of SB 1293 and SB 1294 at:

http://consumersforhealthcare.org/blog/mch-letter-lawmakers-urging-careful-deliberate-blue-cross-blue-shield-michigan-conversion

For More Information, visit:

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ConsumersforHealthcare.org

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Facebook.com/ConsumersforHealthcare

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@MICHealthcare