Upgrade considered for Michigan's regulatory system

Blue Cross Blue Shield of Michigan (BCBSM) has been operating under regulations dating back to 1980, but new legislation proposed by Gov. Rick Snyder aims to bring the state up to date with the industry’s evolution. The insurer would benefit by the more balanced set of rules, and the board is considering the proposal.

“What Blue Cross Blue Shield of Michigan has long advocated for in Michigan is a functional regulatory system that treats all insurers consistently,” says Andrew Hetzel, vice president of corporate communications. “Michigan’s regulatory system today is one of the most dysfunctional in the country because it treats all insurers differently.”

Unlike other HMOs in the state, BCBSM has struggled with a strict review process that has delayed rates from going to market by 18 months or more. Current rules call for the insurance commissioner to determine acceptable rates after the state conducts an actuarial review.

Legislators must consider the change carefully because the Patient Protection and Affordable Care Act dictates that plans participating in the health insurance exchanges must play by the same rules. Such regulatory rework could be seen in other states as well.

BCBSM covers 4.4 million members and currently is an insurer of last resort. In a press conference this week, Snyder said that health reform will essentially make the entire market an insurer of last resort, so the status of BCBSM will be outdated. The national regulations will help to balance the risk pool.

“Governor Snyder proposes to modernize our system of regulation, and he is acting precisely at the right moment given the looming change in health insurance that will start to happen in October next year,” Hetzel says. “His plan starts Michigan on a course for success by giving us a functional common-sense system of regulation.”

While the main advantage for the plan would be the level playing field with other insurers within rate review process, BCBSM also would be able to maintain its not-for-profit status in transitioning to a mutual company. The plan will also maintain guaranteed issue.

A separate not-for-profit entity is planned by the state to improve health in Michigan. BCBSM would contribute $1.5 billion in taxes over the next 18 years to support the social mission.