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A Better Partnership


Oct 2012
October 22, 2012

From The Capitol - October 2012


The Legislature returned for much of September, but then recessed. The House of Representatives will not meet in session again until November 8, giving members an opportunity to campaign for reelection.  The Senate met on October 17 and will not be in session again until November 8 as well.  Unlike House members, Senators do not face reelection this year.

It appears that much of the legislative work will be done in lame duck session, that period of time after the general election and before January 1 when the new Legislature is sworn in.

Michigan seemed like a walk-away win for President Obama until October 3, the evening of the first debate with Governor Romney.  What was a significant lead for the President has narrowed considerably, but the President is still predicted to carry the state.  Democrats down the ballot who were hoping for some coattail effect are now very concerned there will be none.


Blue Cross Slated to Become a Nonprofit Mutual Company:

With the passage of the federal Affordable Care Act (ACA) and the U.S. Supreme Court’s ruling upholding its constitutionality, the mission of Blue Cross & Blue Shield of Michigan (BCBS/M) as insurer of last resort will become obsolete.  In the past, BCBS/M could not deny anyone coverage.  The ACA requires that as of January 1, 2014 all health insurance carriers offer coverage to everyone.  Thus, with this mandate of guaranteed issue, all carriers assume the role of insurer of last resort.

Last month, the Snyder Administration and officials of BCBS/M announced an agreement in principle to convert the health care giant from a public charitable trust to a nonprofit mutual company.  Under the agreement BCBS/M would lose its state tax exempt status (estimated to be worth approximately $100 million annually), and be required to pay $1.5 billion (estimated to be approximately half of its reserve) over 18 years to a charitable foundation yet to be formed.

As a benevolent charitable trust regulated by Public Act 350 of 1980, the Attorney General has authority for oversight and may review the rates the Blues charge its customers.  By converting to a mutual company, oversight by the Attorney General would be eliminated and the company would be regulated by the Office of Financial and Insurance Regulation (OFIR) like any other insurer.

Many subscribers, consumer advocacy groups and competitors believe that privatizing this giant that controls 70% of the commercial market could do more harm toward competition unless certain controls are enacted.  For instance, these groups seek statutory language that would prohibit most favored nation contract provisions to the exclusion of the insurer’s competitor which require a provider to accept an insurer’s lowest rate of reimbursement.  These groups are also concerned about arrangements with providers that amount to cost shifting the shortfalls in Medicare and Medicaid payment for services to other providers.  In addition, because of BCBS/M’s market dominance, these groups want to see some controls and further regulation on a “dominant carrier” defined as one whose share of the market is 50% or more in a designated region.  Then there is the issue of just how much is BCBS/M worth.  Many believe a valuation of the entity should be made prior to its conversion to a mutual.  They claim that since the assets are in trust as state assets, the value should be determined now before the assets become the property of policy holders.

Governor Snyder would like to have the entire conversion package on his desk for his signature by the end of the year.  Others would like to see a more deliberate approach, one that could go well into the first quarter of 2013. For now at least, the Snyder Administration is prevailing on the timetable for passage. On October 17, the Senate by a vote of 33-4, sent Senate Bills 1293 and 1294 to the House.

The bills do require an insurance carrier to seek the permission of the Director of the Office of Financial and Insurance Regulation prior to using a “most favored nation” provision rather than an outright ban.  The Senate did not include any prohibition on cost shifting, nor did it require a valuation of the entity prior to conversion.

The House Insurance Committe chair has indicated that an initial hearing before his committee will be held on November 13.

Look for the BCBS conversion effort to take center stage during lame duck session.

Michigan Department of Community Health Seeking Managed Care for Dual Eligibles:

Earlier this year the Michigan Department of Community Health (DCH) submitted a plan to the Center for Medicare and Medicaid Services (CMS) for integration into Medicaid managed care those who are eligible for both the Medicare and Medicaid programs.  Integration of those who are “dual eligibles” is thought to lead to better care through coordination and be more cost effective.  It is estimated that there are approximately 220,000 people in Michigan who qualify and many need both mental health and physical health services.  The goal of CMS was to not only integrate this population into managed care, but to the extent possible, integrate the services of behaviorial and physical health.  The first proposal submitted by DCH to CMS kept a bifurcated system with what DCH termed a “care bridge” spanning the two systems.  Accountable care organizations such as Medicaid health plans would be the bridge, responsible for coordinating the patient’s care.

Thereafter, CMS returned the plan to DCH for resubmittal, ostensibly so DCH could devise ways to achieve greater integration.  A second plan has been submitted for CMS review.  An implementation date of January 1, 2014 is still anticipated.

Mandatory Expansion of Medicaid in Michigan?

As enacted, the ACA called for mandatory state expansion of Medicaid for those whose income is 133% or less of the federal poverty level.  In Michigan in the next decade, this would add approximately 500,000 new individuals to the program.  The cost will be borne entirely by the federal government with states assuming a 10% match by 2020.  In late June, the U.S. Supreme Court upheld the constitutionality of the ACA, but also ruled that the federal government could not compel states to expand Medicaid by threatening to withhold funding for existing Medicaid programs.
In Michigan, the Snyder Administration is studying the option and will have made a decision by the time it unveils its proposed budget to the Legislature in February. Advocates urging expansion claim the state will save money because a patient’s care would be managed and would include preventative measures, such as coverage for checkups, leading to fewer visits to a hospital emergency room, which is much more expensive. Opponents of expansion point to the eventual cost to the state once the federal government ends the full subsidy.

As a consequence of that concern, legislation prohibiting expansion of the program has been introduced by Sen. Bruce Caswell (R-Hillsdale).  However, SB 1245 is not expected to receive action this session.

Medical Claims Tax Sticking Around For Now:

Last year the Legislature enacted a 1% tax on most paid medical claims.  Revenue from this tax is used for Michigan’s match to draw down twice as much in federal funding for the Medicaid program.  The claims tax replaced the 6% use tax imposed on Medicaid health plans and certain other Medicaid providers.

Earlier this year the Self Insurers Association began an action in federal district court for the Eastern District of Michigan challenging the applicability of the claims tax, saying it was preempted by the Employee Retirement Income System Act (ERISA).  The court recently ruled for the State of Michigan, saying the claims tax did not single ERISA out for taxation and, therefore, the ERISA preemption did not apply.  An appeal to the Sixth Circuit Court of Appeals is expected.

Meantime, the Department of Technology, Management and Budget reported the collections of the tax are much less than anticipated.  In fact, the Department reported a shortfall of $130 million, attributable to payers not being aware of their obligation and some refusing to pay because they claim their existing contracts do not call for such an added cost.  Department officials believe the shortfall can be made up this year by a healthier general fund and by dipping into the Budget Stabilization “rainy day” Fund.

Nurse Practitioners May Get Larger Roles:

The Department of Licensing and Regulatory Affairs (LARA) estimates that by the end of this decade, Michigan will have an acute shortage of primary care physicians.  This is at a time when, due to the ACA, more people of lesser financial means will have some form of health insurance.  This situation will certainly put a strain on the health care delivery system.

In addition, LARA wants the authority to specifically regulate what has come to be known as “Advanced Practice Registered Nurses (APRN).”  These health professionals have training and education beyond that of a registered nurse.  They are known as nurse midwives, nurse practitioners and certified clinical nurses.

Legislation has been introduced (Senate Bill 481 and House Bill 4774) which would specifically recognize APRNs and authorize LARA to regulate them.  However, the legislation also specifically allows nurse practitioners the ability to conduct diagnostic tests, including lab and imaging tests, and to come to a diagnosis.  Nurses claim they do many of these things now.  Physicians claim that when nurses engage in such things as diagnostic testing and physical examinations, it is only under the supervision of a physician.  APRNs want to practice independently from physicians. At this stage, look for some legislation recognizing APRNs, but it appears the more traditional physician supervision model will continue.

Special Committee Looks at Transportation Funding:

In September, Senate Majority Leader Randy Richardville (R-Monroe) named 3 fellow Senators to a special committee on transportation funding.  Named to the Committee were Sen. Roger Kahn (R-Saginaw Twp.), Chair of the Senate Appropriations Committee; Sen. John Pappageorge (R-Troy), Chair of the Transportation Subcommittee for Appropriations; and Sen. Rebekah Warren (D-Ann Arbor).

The Committee will examine how the state pays for its transportation needs before the new budget season begins. The Committee has already met once and plans to do so throughout the fall.

Last year, Governor Snyder proposed raising an additional $1.4 billion for transportation needs.  The plan called for a significant increase in vehicle registration fees and a revision of the fuel tax.  The proposal met with a chilly response in the Legislature.

Any recommendation regarding transportation funding could be subject to Proposal 12-5, which is on the general election ballot.  That proposal requires a two-thirds vote of the Legislature in order to increase taxes.

Social Network Privacy Legislation Bill Pending in Senate:

The practice of employers and education institutions requiring an individual to disclose access information to a personal internet account as a requirement for hire or admission gained significant attention earlier this year.  Some job applicants were being required to submit their login information for accounts such as Facebook as part of the application process.

In an effort to protect the personal privacy of job applicants and would be students, House Bill 5523 was introduced by Rep. Aric Nesbitt (R-Lawton).

The bill prohibits employers or educational institutions from requesting disclosure of access information associated with the person’s social networking account. In addition, an employer or an educational institution would be prohibited from discharging, disciplining or failing to hire for employment or admitting for enrollment because  the person did not disclose the access information.

The bill does not, however, prohibit an employer from requesting or requiring an employee to disclose access information in order to obtain access to equipment paid for by the employer, or an account provided by the employer, or in furtherance of an investigation to ensure compliance with applicable law.

The bill has passed the House by a vote of 108-0 and is now with the Senate Committee on Energy and Technology.  Senate passage is expected this year.

Efforts Afoot to Phase Out Personal Property Tax

The Governor and major business advocacy groups will be seeking House passage of an eight bill Senate passed package that will phase out the personal property tax on business equipment.  Senate Bills 1065 – 1072 would, among other things:
  • Eliminate the personal property tax for eligible manufacturing property acquired after December 31, 2011, beginning January 1, 2016.
  • Eliminate the personal property tax on small commercial and industrial businesses (taxable value of $40,000 or less). Effective December 31, 2012.
  • Create a broad calculation but not reimbursement formula to replace some, but not all of the personal property tax revenue to be lost by local government.

Local governments rely on this revenue and opposed its passage in the Senate and will oppose it in the House.  That is why House leadership chose not to consider this package until after the election.


As of the evening of October 3, it appeared that President Barack Obama would easily defeat GOP nominee former Massachusetts Governor Mitt Romney for Michigan’s 16 electoral votes. However, by all accounts, Governor Romney’s performance in the first debate so outshined the President that voters are now taking a second look at his candidacy. While the race has tightened in Michigan and nationally, President Obama is still expected to win the state's 16 electoral votes.

U.S. Senate:

Unlike the President, the Democratic Party incumbent has a comfortable lead.  Latest polls show Sen. Debbie Stabenow leading her Republican opponent, former Congressman Pete Hoekstra, by double digits.  At this juncture it is likely that Stabenow will be returned to the Senate.

Supreme Court:

With three seats on the Supreme Court being contested, the 4-3 Republican majority will be put to the test.  Republican incumbents Steven Markman and Brian Zahra are seeking to retain their seats, Justice Markman for re-election to an 8-year term and Justice Zahra for a separate 2-year term, as he was recently appointed by Governor Snyder.  The other spot, also an 8 year term, is a vacancy occasioned by the retirement of Justice Marilyn Jean Kelly.  The Republicans have nominated Oakland County Circuit Court Judge Colleen O’Brien for the other 8-year term. The nominees of the Democratic Party for the two 8-year terms are Wayne County Circuit Court Judge Connie Kelley and Bridget McCormack, a law school dean.  To face off against Justice Zahra for the 2-year term the Democrats nominated Southfield District Court Judge Sheila Johnson.

In the race for the two 8-year terms, the top two vote getters among the seven listed will be elected.  In the race for the 2-year term, only the top vote getter wins.

Sitting judges have an advantage that no other candidate on the ballot has, namely an incumbency designation.  Through the years, this has proven to be very hard for a challenger to overcome.  However, female judicial candidates have been enjoying greater success in recent years, both locally and statewide.  For instance, Democrat Diane Hathaway defeated sitting Republican Chief Justice Cliff Taylor in 2008, and Republican Mary Beth Kelly obtained more votes than Democratic Party nominee Justice Alton Davis in 2010.  As of now, look for the GOP to maintain its 4-3 majority.

U.S. House of Representatives:

The only true competitive race among Michigan’s 14 congressional districts is found in the 1st District, which is huge geographically, encompassing the entire Upper Peninsula and much of the lower. First-term incumbent Dr. Dan Benishek is in a tough rematch with former state representative, Democrat Gary McDowell. In the last week of the campaign, look for the incumbent to far outspend his Democratic challenger both through his own campaign funds and through the support of Super PACs.
State House of Representatives:

Thanks to the 2010 GOP tidal wave election, Republicans hold a 64-46 majority in the state house.  Until recently, Democrats were hoping that the popularity of the top of the ticket would have at least some coattail effect.  That does not appear to be the case now as the President is now barely ahead of Governor Romney.  Organized labor has two ballot proposals, which should help the Democrats bring out their base core of support and retake at least some of the 20 seats they lost in 2010.  Still, last year the majority Republicans were able to redistrict the House to their advantage. Look for the Democrats to make gains but, at least at this point, not to gain the majority.

Ballot Issues:

Voters will decide a number of proposals that have been placed on the ballot.  Among them is whether the recently enacted emergency manager law should be repealed, and amendments to the state constitution which would:
  • Enshrine collective bargaining into the state constitution
  • Guarantee unionized home health care
  • Require a 2/3 majority vote in both chambers of the Legislature in order to enact any tax increase
  • Require that at least 25% of all energy used in this state come from renewable sources
  • Require voter approval of any new international bridges or tunnels before state funds or resources are used for acquiring land, designing, constructing or financing such a project.

In March of 2011, the Legislature passed and the Governor signed Public Act 4 of 2011, otherwise known as the Emergency Manager Law.  The law establishes criteria to assess the financial condition of a local government, authorizes the Governor to appoint an emergency manager upon the state’s finding of a financial emergency, allow the emergency manager to act in place of local government officials, and require the emergency manger to develop financial and operating plans, which could include the modification or termination of contracts.

In addition, the law authorizes a state appointment review team to enter into consent decrees approved by the affected local government.  Many local governments and their organizations oppose the legislation because they said it usurped the authority of local officials who are democratically elected by the people.  Public employee unions opposed it as potentially interfering with existing contracts, threatening arrangements that were obtained as a result of collective bargaining.

This set the stage for public employee unions to organize a petition drive to place the law on the ballot pursuant to the public’s right of referendum.  Nearly twice as many signatures were submitted as those needed and, after some political wrangling and court action, the question was placed on the ballot.

At this time, whether or not the law is approved by the public is a close question.

With the Republican sweep in the 2010 general election, the GOP controls all three branches of state government.  From the outset of the 2011-2012 legislative session, several proposals were enacted which organized labor viewed as a threat to its membership and effectiveness as a union.  Moreover, several GOP legislators actively promoted introducing legislation that would make Michigan a “right to work” state.  That is, if workers organized to form a union, a member of that group would have a choice of either joining that union or opting out of membership rather than requiring union membership as is now the case.  Given this scenario, organized labor began an aggressive petition drive to amend the Constitution to enshrine the right to collectively bargain within the document. After a court challenge and considerable lobbying to keep the matter off the ballot, the Michigan Supreme Court ruled the question should be placed before the voters.  A vigorous campaign has been waged by both proponents (labor) and opponents (business) with millions being spent to sway the voters.  As of now, it appears that opponents of the measure have the upper hand.

Environmental and alternative energy groups spearheaded a petition drive amending the state constitution to establish a renewable energy standard.  Among other things, the proposal would:
  • Require electric utilities to provide at least 25% of their annual retail sales of electricity from renewable energy sources which are wind, solar, biomass and hydro power by 2025.
  • In order to achieve compliance with the renewable energy standard, limit elective utility rate increases charged to customers to not more than 1% per year.

People affiliated with the utility industry say the standard set is not attainable.  Proponents of the measure say other states have attained it and Michigan certainly can.  As with the campaign involving the collective bargaining proposal, a vigorous campaign is being waged by groups on both sides of this issue.  At this time, however, it would appear opponents have the upper hand.

The second organized labor backed proposal would amend the state constitution to:
  • Establish the Michigan Quality Home Care Council (MQHCC) that would set minimum compensation standards and terms and conditions of employment.
  • Allow in-home care workers to bargain collectively with the MQHCC.
  • Require MQHCC to provide training for in-home care workers, create a registry of those workers and provide financial services to patients to manage the cost of in-home care.

This proposal has not met with the vehement opposition that its “big brother” collective bargaining proposal 12-2 has, because it is specific to home health care.  Nevertheless, some of the fallout in negative advertising directed against proposal 12-2 is also having a negative impact on this proposal.  At least right now, opponents have the upper hand.

This proposal would amend the state constitution to require a 2/3 majority vote of the State House and State Senate, or a statewide vote of the people at a November election in order to levy new or increased taxes or expand the base of taxation or increase the rate of taxation.

The proposal was initiated by tax limitation proponents.  It is opposed by many Republicans and Democrats, including current Republican Governor Rick Snyder as being too extreme.  At this time, the proposal has a slightly less than 50/50 chance for passage.

This proposal was initiated and is being funded by the Detroit International Bridge Company (DIBC), which is owned by the Maroun family.  DIBC owns the lone bridge spanning the Detroit River, connecting the City of Detroit with Windsor, Ontario Canada.  For years, both the State of Michigan and the Canadian government have desired an additional bridge because, among other things, the current bridge is more than 80 years old and heavy traffic loads and delays in crossing the bridge have interfered with efficient trucking and international transportation. 

The Canadian government and the State of Michigan reached an agreement in June by which an Authority would be created to approve a private entity responsible for the construction and operation of a new bridge at no cost to Michigan. The new bridge is to be located approximately 2 miles south of the existing bridge. DIBC has funded a huge advertising campaign, spending almost $31 million for this proposal, which would amend the Michigan constitution to:
  • Require the approval of a majority of voters at a statewide election and in each and every municipality where “new international bridges or tunnels for motor vehicles” are to be located before Michigan could spend any state funds or resources for acquiring land, designing, soliciting bids for construction, financing or promotion of new international bridges and tunnels.
  • Create a definition of “new international bridges or tunnels for motor vehicles” meaning “any bridge or tunnel which is not open to the public and serving traffic as of January 1, 2012.”

This definition has caused concern. Opponents contend that the proposal will require prior state-wide and local voter approval  of "any bridge or tunnel which is not open to the public and serving traffic as of January 1, 2012" regardless of whether the bridge or tunnel is "international" or "for motor vehicles" since these terms are not included in the definition. This would have far-reaching consequences for every construction project in the state involving a bridge, tunnel or highway overpass. Opponents content that hundreds of millions of dollars of construction projects currently planned or already in progess would be affected by this proposal if it passes. 

Given the amount of money being poured into the campaign to obtain voter approval, the proposal does have a 50% chance of passage.

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