Did BCBS of Michigan illegally transfer $125M to subsidiary?

Blue Cross Blue Shield of Michigan's for-profit subsidiary, The Accident Fund, was allowed by state law to buy out-of-state insurance companies, the Michigan Court of Appeals ruled Tuesday. However, the legality of Blue Cross's transfer of $125 million to its subsidiary to buy the firms wasn't determined.

Michigan Attorney General Mike Cox may appeal the ruling, hoping to prove that the Blues "actually pulled the strings" to direct the Accident Fund to buy the companies. Cox wants the $125 million spent on the deal returned to the Blues to reduce the cost of health insurance. "We argue that the Blues decides which companies should be bought and that they gave them money to buy it," John Sellek, a spokesman for the office, told the Detroit Free Press.

"What's appalling to the attorney general is the 70 percent of Michigan residents who have Blue Cross for their insurance have been asked by Blue Cross repeatedly to pay higher rates, but at the same time, Blue Cross gave way over $100 million to a for-profit company," Sellek told the Detroit News.

State law prohibits Blue Cross, but not the Accident Fund, from owning more than 10 percent of other insurance companies. The three insurance companies that Accident Fund purchased are United Wisconsin Insurance Co., Third Coast Insurance Co. and CompWest Insurance Company, Crain’s Detroit Business reports.

Blue Cross spokeswoman Helen Stojic said the insurer is pleased with its one legal victory and believes it will prevail on the second issue. "Our subsidiaries are a stabilizing influence and help us operate on a financial margin of less than one percent of our healthcare business," she told the Detroit News. "Accident Fund's national growth has returned hundreds of new jobs and economic growth to Michigan." Over the past decade, Blue Cross contends more than $100 million has been returned to the company from Accident Fund profits, according to Crain’s Detroit Business.

The case is now remanded to Ingham County Circuit Court.

To learn more:
- read the Detroit Free Press article
- see the Detroit News story
- read the Crain’s Detroit Business article

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