Saying "Blue Cross Blue Shield of Michigan [BCBSM] is too big to be allowed to fail," Michigan Insurance Commissioner Frank M. Fitzgerald recently outlined the financial problems facing the company to the state's Committee on Health Insurance and urged lawmakers to consider health insurance regulatory and marketplace reforms before a full-blown crisis occurs.

Fitzgerald's remarks were based on his department's 2000-2001 financial examination of BCBSM, which he says revealed "a number of very disturbing trends for the company," including:

• Cumulative losses in the small group health insurance marketplace (groups of 99 or fewer members) amounting to almost $500 million over six years, despite double-digit rate hikes for the 35,000 small businesses in small groups each year for the past three consecutive years.

• An information technology system that is in "desperate" need of upgrading to the tune of $500 million or more.

• Cash strain caused by the acquisition and operation of subsidiaries.

• An awkward management structure with a large board of directors (35 members) that includes a mix of representatives that "may not appropriately represent the interests of Michigan's citizens."

"[BCBSM] stands at a crossroad," says Fitzgerald. "Continuation of the status quo will threaten the affordability of and access to health care coverage. In fact, the status quo will threaten the ability of the corporation to deliver on its charitable and benevolent missions to subsidize premiums for senior citizens and to act as the insurer of last resort for individuals who cannot find insurance elsewhere."

In his state-of-the-state address, Michigan Gov. John Engler proposed creating a "Community Health Trust Fund," a high-risk health insurance pool to help provide health insurance coverage to people with pre-existing conditions "should Blue Cross ever follow the path of more than 20 other state plans by becoming a private company," as well as:

• Strengthening Fitzgerald's financial oversight of BCBSM.

• Granting the commissioner the authority to restructure BCBSM's board of directors.