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Blue Cross Blue Shield of Michigan would pay taxes

Blue Cross Blue Shield of Michigan would pay taxes. By Melissa Anders | manders@mlive.com. http://www.mlive.com/business/index.ssf/2012/09/blue_cross_blue_shield_of_mich.html. Change BCBS Status.

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Blue Cross Blue Shield of Michigan would pay taxes

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  1. Blue Cross Blue Shield of Michigan would pay taxes By Melissa Anders | manders@mlive.com http://www.mlive.com/business/index.ssf/2012/09/blue_cross_blue_shield_of_mich.html

  2. Change BCBS Status • LANSING, MI —Gov. Rick Snyder this morning announced plans to convert Blue Cross Blue Shield of Michigan into a nonprofit mutual insurance company. • Since 1980, the state’s largest insurer has been exempt from paying state and local taxes in exchange for serving as the insurer of last resort, meaning it can’t refuse coverage to people with pre-existing conditions. • But given the pending changes under federal health care reform, much of the 1980 law governing the Blues will become obsolete, according to Snyder.

  3. Under PPACA • Under PPACA, starting Jan. 1, 2014, all insurers have to offer coverage to everyone, regardless of health status. • The conversion, slated to go into effect Jan. 1, 2014, must be approved by the legislature and Blues board of directors. • Blue Cross would give $1.5 billion over 18 years to a new public health and wellness nonprofit with an independent board. It’s a continuation of the insurer’s current social mission. • The insurer also would pay an estimated $100 million a year in taxes to state and local governments. Blue Cross would no longer have to pay 1 percent of its revenue toward subsidizing certain lines of coverage, which equates to about $200 million a year.

  4. Competition • Competitors have complained about the Blues’ tax-exempt status, while Blue Cross has wanted to get away from their long regulatory process for getting rates approved. • It currently takes about 18 months for Blue Cross to get rates approved by the state. That would shrink to two to three months under the new plan, said R. Kevin Clinton, commissioner of the Office of Financial and Insurance Regulation.

  5. The Economics – Regulated Monopoly D P • Regulation makes the monopoly a price taker. Increases Q. • If they pay taxes, their MC=AC • On the other hand, if they need not take everyone, their MC=AC may . Pm DWm Pr DWr MC=AC MR Qm Qr Q

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