Rethinking Blue Cross’s Conversion: Critical Analysis by the Center for Insurance Research

In the debate surrounding the proposed conversion of Blue Cross Blue Shield of Michigan into a mutual insurer, the Center for Insurance Research has presented a compelling critique that questions both the rationale and the legislative approach to this significant transformation. Their critique highlights several critical areas of concern:

1. Questionable Rationale for Conversion: The Center argues that the stated reasons for converting Blue Cross into a mutual insurer are unsubstantiated and lack genuine merit. The need for such a drastic change in the insurer’s structure is not convincingly justified by the proponents of the conversion.
2. Lack of Restrictions on Capital Use: A major point of contention is the leniency the proposed bills offer regarding how Blue Cross can utilize its capital. This capital, considered a charitable asset, lacks protective limitations in the bills, raising concerns about potential misuse or strategic misdirection that could favor corporate interests over public health needs.
3. Insufficient Compensation for Michigan’s Taxpayers: The legislation does not adequately address the compensation due to Michigan taxpayers for the conversion of assets valued at approximately $6.4 billion. This oversight is seen as a significant failure to protect the state’s financial interests and those of its taxpayers, potentially leading to a loss of public resources.
4. Neglect of Established Financial Mechanisms: The Center also points out the disregard for traditional methods of capitalizing mutual insurers, such as issuing guarantee stock or surplus notes. These instruments could provide a structured way to manage the insurer’s capital responsibly while ensuring that the state and its taxpayers are adequately compensated.
5. Urgency Versus Deliberation: There is a pressing concern about the expedited manner in which these bills are being pushed through legislative processes. The Center advocates for a more deliberate and thorough examination to ensure that all implications—financial, societal, and healthcare-related—are fully considered before any irreversible decisions are made.
6. Overall Impact on Michigan’s Insurance Landscape: The overarching fear is that the conversion could give Blue Cross an undue advantage in the insurance market, distorting competition and potentially leading to higher insurance costs and reduced coverage options for Michigan residents.

In conclusion, the Center for Insurance Research calls for a halt to the hurried legislative treatment of the Blue Cross conversion, urging a more measured and thoughtful approach. They emphasize the need for comprehensive assessments that prioritize public interest and safeguard the state’s financial and healthcare landscapes. Such careful deliberation is crucial to ensure that the conversion, if it occurs, is conducted in a manner that truly benefits Michigan and its residents. This detailed critique invites lawmakers to revisit the drawing board and address the substantial gaps and concerns raised by stakeholders before proceeding.