Anderson Economic Group Work

Benefits Outweigh Burdens for Blue Cross

FOR IMMEDIATE RELEASE                                                    
Friday, Jan. 18, 2008                        

Contact: Caroline Sallee, Anderson
Economic Group, (517) 333-6984

Independent analysis shows unique status gives Blues $129 million net benefit

LANSING – Blue Cross Blue Shield of Michigan (BCBSM) receives $129 million more each year in state tax exemptions and other benefits than it spends covering Michigan’s sickest patients, according to a report released today by Anderson Economic Group of East Lansing.
    The independent analysis found that BCBSM receives a tax exemption worth $112 million in income, property and sales tax breaks each year, in addition to the ability to collect subsidies worth $25 million from its group customers to offset losses in other lines. However, it spent only $7.7 million of that in its role as Michigan’s nonprofit insurer of last resort, which requires the Blues to accept all consumers who apply for health insurance coverage.
The 50-page study, which looked at the specific statutory mission of BCBSM within the Michigan health insurance market, quantified the benefits to and the burdens on Blue Cross as the company fulfills its current statutory mission. The authors spent three months reviewing publicly available data from the state Office of Financial and Insurance Services, Blue Cross financial records and tax records from local assessors’ offices.
    “Our rigorous analysis of public records and other data shows that Blue Cross Blue Shield received a $129 million net benefit in 2006 as a result of its unique tax status and role in the Michigan health insurance market,” said Patrick Anderson, principal and CEO of  Anderson Economic Group.
    The study is the first in-depth look at the historic role of Blue Cross Blue Shield of Michigan and the evolution of its social mission and financial status over the past 70 years. The AEG report found that the burdens placed on Blue Cross have weakened since 1980, while the benefits, such as the general tax exemption, have remained unchanged.
    Blue Cross’ place in the Michigan health insurance market was also reviewed. BCBSM’s market share is large, its financial position is sound and its reserves are growing. The AEG report found that over 70 percent of Michigan residents with commercial insurance in 2006 were insured by Blue Cross. Additionally, Blue Cross’ reserves are growing – to more than $2.8 billion last year.
     The analysis comes as the Michigan Senate deliberates the complex issue of reforming the health insurance market in Michigan. Among other things, the Blues legislation would allow the insurer to maintain its nonprofit status while gaining access to other insurance markets and requiring insurers who do not receive tax breaks to pay into a pool run by Blue Cross to cover high-risk consumers.
    House Bills 5282-5285, backed by Blue Cross, passed the House in record time last fall. The legislation is now before the Senate Health Policy Committee, which is taking a more deliberative approach and holding its first hearing Wednesday, Jan. 23.     
    “These findings should be part of the discussion as lawmakers consider legislation that would reduce the statutory burdens placed on Blue Cross without reducing the benefits,” Anderson said.
    Anderson Economic Group, LLC is an economic consulting firm with expertise in public policy, tax analysis, financial valuation, economics, market research and land use economics. AEG has offices in East Lansing, Chicago and Dallas.