Attorney General Incorrectly Interprets BCBSM Accounting Issue
Blues Call for Legislators to Question Future Efforts
to Influence Reform Debate Through Faulty Information
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LANSING, Dec. 9, 2008 - Whether purposefully or accidentally, the Michigan Attorney General’s Office issued misinformation to the Legislature and the news media today regarding a pension accounting calculation by Blue Cross Blue Shield of Michigan. The Attorney General alleges incorrectly that BCBSM used a change in accounting rules to increase projected financial losses on health insurance lines of business.
BCBSM called for legislators to question the accuracy and credibility of future statements made in the heat of debate by opponents of insurance reform, who are seeking to influence the Legislature’s deliberations as the clock ticks toward the end of the 2008 session year.
“The statement issued today by the Attorney General’s office is false. Blue Cross is not calculating pension liabilities into our projections of individual market losses,” said Mark Bartlett, BCBSM Executive Vice President and Chief Financial Officer. “Our projected losses on individual lines of insurance are more than $260 million for 2009 and more than $300 million for 2010, and our pension accounting does not factor into these projections.”
Bartlett clarified that new proposed accounting rules contained in an issue paper released at last week’s meetings of the National Association of Insurance Commissioners changed Blue Cross’s method for forecasting future pension liabilities. The proposed new rules alter BCBSM’s forecast by delaying implementation until 2011 and by allowing BCBSM to spread the impact of the pension liability over several years. The issue paper’s new draft rules are expected to be finalized in the future. BCBSM considers the guidance of NAIC proposed rules in its own forecasting. BCBSM financial statements are independently audited annually by Deloitte.
The booking of pension liabilities does not show as a “loss” on BCBSM’s income statement, Bartlett clarified.
“This is a simple accounting rule change that opponents of reform are using to confuse the debate and mischaracterize the nature of Blues losses,” Bartlett said. “The truth is that our pension liabilities have no bearing on our projected financial losses for individual insurance lines, which remain at the heart of this debate as they are a clear symptom of a financially failing insurance market here in Michigan.”
Blue Cross Blue Shield of Michigan is nonprofit and an independent licensee of the Blue Cross and Blue Shield Association.
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