Michigan “Blues” Conversion Sparks Controversy

A legislative effort to convert Blue Cross Blue Shield of Michigan, a nonprofit organization that controls 70% of Michigan’s insurance market, into a for-profit insurance company is encountering strong opposition from the chair of the state’s Senate Insurance Committee.  The Detroit News reports that the 31-year-old statute granting the Blues’ nonprofit status is up for review, which prompted the Governor to call for a “fresh look” and consideration of a for-profit conversion that could arguably stimulate competition, decrease rates, and improve overall access to health care.  The company is opposed to the proposed conversion, arguing that “[a] nonprofit, community-governed Blue Cross allows the company to do more to improve health care quality and security for all the people of Michigan, rather than operate as a profit generator for stockholder owners.”

This Michigan development is not a new nor unique one, as Blues have been converted in other states.  As aptly raised by The Nonprofit Quarterly in its related article, a for-profit conversion customarily results in the creation of a charitable foundation – does this adequately account for the loss of charitable assets that results from such a conversion?  Will there be any tangible effect from the Blues operating as a for-profit insurer, especially in light of the Affordable Care Act?

NAM