Opinion ID: 1664239
Heading Depth: 1
Heading Rank: 5

Heading: does pa 350 deprive bcbsm of liberty and property without due process of law by effectively converting a heretofore private corporation into a public, governmental corporation?

Text: BCBSM attacks 1980 PA 350 on the ground that certain mandatory provisions of the act, in effect, constitute a government takeover of BCBSM by transforming it from a private corporation into an agency of the state government in violation of due process of law. [34] The crux of BCBSM'S takeover argument is that: By PA 350, the Michigan Legislature has charged BCBSM [A] with the responsibility for formulating and managing a health care system for the state under the superintending control of the Commissioner of Insurance. [B] It has created a legislatively mandated board of directors, with some seats guaranteed to various legislatively determined constituencies and others to political appointees. [C] It has removed from BCBSM control over its composition, structure and corporate direction. [D] It has imposed on BCBSM the governmental responsibility of ensuring for all people in the state access to health care benefits at a fair and reasonable cost. [E] The Commissioner of Insurance is given peremptory power and authority over the managerial affairs of BCBSM, controlling: what lines of business it writes; what kinds of certificates it writes; all charges for those certificates; BCBSM'S contracts with its participating providers; and all methods of provider reimbursement. These provisions of 1980 PA 350, when considered en masse, amount to a governmental coup. [Emphasis in the original.] We reject BCBSM'S argument on the ground that BCBSM'S construction of the act is overblown and unsubstantiated as compared with what the statute actually provides. By examining BCBSM'S allegations line by line against the exact statutory language of the act, the fallacy in BCBSM'S interpretation becomes clear. [A] After a thorough perusal of the numerous provisions of the act, we are unable to find any language, nor has BCBSM cited any, which delegates to BCBSM the responsibility for formulating and managing the state's health care system. We therefore dismiss BCBSM'S first argument on the basis of our analysis under Part II(C)(1). [B] We find BCBSM'S next allegation that 1980 PA 350's legislatively mandated board of directors has removed from BCBSM control over its board structure and composition without due process of law to be equally unfounded. BCBSM cites §§ 301(2) and 305(1), which permit the Governor to appoint members to BCBSM'S governing bodies as indicia of a governmental taking. BCBSM argues that these provisions and the remaining sections of § 301 are onerous and interfere with managerial prerogatives. Hence, BCBSM concludes that there has been a taking without due process of law. We disagree. First we note that the mere fact that a regulation imposes a burden or expense upon the corporation, or subjects it to loss or inconvenience, does not make it a taking. See Chesapeake & O R Co v Public Service Comm of West Virginia, 242 US 603; 37 S Ct 234; 61 L Ed 520 (1917); Southern Wisconsin R Co v City of Madison, 240 US 457; 36 S Ct 400; 60 L Ed 739 (1916); Missouri Pacific R Co v City of Omaha, 235 US 121; 35 S Ct 82; 59 L Ed 157 (1914). We do not think that the action taken here constitutes a taking. The state appointees constitute only a small voice on BCBSM'S governing bodies, and the remainder of the requirements in no sense interfere with managerial discretion. The fact that some members and directors are required to be selected from certain groups is not so onerous as to constitute a taking. To require a membership and board of directors that is more representative of all component groups interested in BCBSM'S operations does not amount to a government takeover of the corporation. Moreover, for the very reasons discussed in Part II(C)(4), we find that §§ 301(1)-(5), (7) and 305(1) are reasonably related to a legitimate legislative objective. See Shavers v Attorney General, 402 Mich 554, 612-613; 267 NW2d 72 (1978). We uphold the constitutionality of those sections as against BCBSM'S due process claim. [C] BCBSM alleges that 1980 PA 350 has effectively removed from BCBSM control over its corporate direction. Specifically, BCBSM argues that by stripping its corporate members of the power and authority they formerly had to amend, adopt, or repeal the bylaws and placing this power in the board of directors, § 302(1) of 1980 PA 350 constitutes a taking of BCBSM'S property without due process of law. We disagree. Contrary to BCBSM'S contention, the act does not remove control from BCBSM over its corporate direction, but instead shifts it from BCBSM'S corporate members to its board of directors. While in some sense this can be deemed a loss of the members' unqualified right to control the corporation, it is clear that losses incident to the lawful exercise of the police power are noncompensable. See Nowak, Rotunda & Young, Constitutional Law (2d ed), pp 483-485; Sax, Takings and the police power, 74 Yale L J 36 (1964). The United States Supreme Court has consistently upheld government regulation which may result in the loss of use or economic exploitation of property of a private owner without requiring compensation where such regulation was justified as promoting the health, safety, morals, or general welfare of the public. See Andrus v Allard, 444 US 51, 64-68; 100 S Ct 318; 62 L Ed 2d 210 (1979); Penn Central Transportation Co v New York City, 438 US 104, 123-129; 98 S Ct 2646; 57 L Ed 2d 631 (1978). In Penn Central, supra, p 124, the Court identified several factors to determine when a regulatory measure rises to a taking in violation of the Fifth Amendment: The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. So, too, is the character of the governmental action. A taking may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. [Citations omitted.] Under the circumstances in the instant case, the regulation in question does not amount to a taking. The members of BCBSM, unlike stockholders of a corporation, have no investment-backed expectations in their unqualified right to control BCBSM. BCBSM points to no discernible monetary or other equitable interest of the members in BCBSM, which give rise to an investment-backed expectation. While several hospitals and the Michigan Medical Society did advance money for working capital for the predecessors of BCBSM, this money was advanced in the form of a loan and it seems has in fact been repaid. Further, the regulation cannot be characterized as a physical invasion by government over BCBSM'S corporate direction. The purpose of this provision transferring control over BCBSM'S bylaws from the members to the directors is to promote the interests of all component groups BCBSM was designed to serve and to reduce the possibility of any one group gaining unassailable dominance over the corporation. We fail to see how this provision constitutes a governmental taking of BCBSM'S property. [D] BCBSM'S fourth allegation that the act burdens it with the duty to ensure access to health care benefits at a fair and reasonable cost for all people of the state is another example of BCBSM'S misinterpretation of the applicable statutory language. A proper interpretation of the act indicates that the Legislature intended BCBSM to secure the opportunity for access to health care services at a fair and reasonable price for all of the people of this state who apply for a certificate, § 202(1)(d)(ii). We are unable to discern how this provision imposes upon BCBSM an exclusively governmental function. See Part II(C)(1). [E] We also reject BCBSM'S final allegation that 1980 PA 350 gives the Insurance Commissioner peremptory power over the managerial affairs of BCBSM with respect to what lines of business it writes, types of and rates for subscriber certificates, participating provider contracts, and methods of provider reimbursement. Again, BCBSM presents a distorted view of the actual statutory provisions. Under our interpretation of the act, BCBSM'S managerial power over its lines of business, subscriber certificates, and provider reimbursement contracts has not been preempted by the Insurance Commissioner. BCBSM still has the power to establish its lines of business, § 205(4), to establish and set rates for subscriber certificates, § 607(1), to enter into provider class plans, § 502(1), and to formulate its methods of provider reimbursement in accordance with the access, quality, and cost goals of the act, § 504(1). The Insurance Commissioner's authority under 1980 PA 350 with respect to the affairs of BCBSM is regulatory not peremptory. [35] We note that under 1939 PA 108 and 109, the commissioner exercised regulatory power over issuance of subscriber certificates, 1939 PA 108, § 5, 1939 PA 109, § 6, rates of those certificates, 1939 PA 109, § 3, and hospital reimbursement arrangements, 1939 PA 109, § 3. See generally Blue Cross & Blue Shield of Michigan, supra . Moreover, regulatory power was also exercised over lines of business. [36] While in certain respects the commissioner's regulatory powers over BCBSM have been broadened and clarified under 1980 PA 350, [37] they are for all intents and purposes coextensive with those the commissioner previously possessed under 1939 PA 108 and 109. Management of the corporation, however, continues to be entrusted to BCBSM'S board of directors, subject as always to the regulatory authority of the Insurance Commissioner. See § 301(1); see also Blue Cross & Blue Shield of Michigan, supra, p 429. Thus, we find BCBSM'S claim that the challenged provisions of 1980 PA 350, in whole or in part, constitute a takeover of BCBSM by transforming it from a private corporation into a government entity without due process of law to be completely unsound.