Michigan Supreme Court to Consider Blue Cross Blue Shield of Michigan’s Authority to Use Capital Funds to Purchase Private Insurance Companies

The Michigan Supreme Court granted the Attorney General’s Application for Leave to Appeal in Michigan Attorney General v. Blue Cross Blue Shield of Michigan to consider two issues: Whether BCBSM could use its own funds to subsidize the Accident Fund, a corporation formed by BCBSM as a “wholly-owned, for-profit stock insurance subsidiary” and whether BCBSM ran afoul of its legislative authority when the Accident Fund thereafter purchased three private, for-profit insurance companies.

Also at issue in the Court of Appeals was whether the insurance commissioner’s interpretation of the statute in favor of BCBSM was entitled to deference.  The Court of Appeals opinion engages in a lengthy discussion of the doctrine of primary jurisdiction, which, in some cases, divests a court of subject-matter jurisdiction over certain aspects of issues that should properly be decided by the administrative agency with the expertise to address them.  The opinion cites and quotes from Travelers Ins v. Detroit Edison, a Michigan Supreme Court opinion that I worked on when I was a clerk at the Supreme Court for Justice Markman.

While the Court of Appeals concluded that the trial court improperly referred to the insurance commissioner to decide the issue, the Court of Appeals nonetheless concludes that BCBSM did not improperly transfer funds to the Accident Fund and therefore the Accident Fund did not run afoul of statutory authority in purchasing the private insurance companies.  A partial concurrence and dissent by Judge Bandstra disagreed with the majority and opined that the $125 million capital contribution to the Accident Fund ran afoul of the statutory authority and that there was no need to remand to the trial court for it to reconsider the issue.  This case will likely have significant implications for BCBSM and will perhaps shed some light on the insurance commissioner’s authority to regulate it.

Here is the Court of Appeals Opinion:  AG v BCBSM (Court of Appeals Opinion) and the Supreme Court’s Grant Order:  AG v BCBSM (Grant Order).

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