HEALTHPLUS OF MICHIGAN
CORPORATE HISTORY/STRUCTURE

Corporate Initiation
HealthPlus of Michigan (HPM) was originally incorporated as “Tri-County HMO” in 1977 and state-licensed on September 1, 1979. HPM was developed from the initial efforts of a broadly-based community task force to become the first Flint-area health maintenance organization (HMO). HPM was developed with the aid of federal grant funds used both for a feasibility study as well as the planning and initial development of the operational HMO.

The name of the corporation was changed in January 1978 to Genesee Health Care, Inc., and on March 22, 1979, the Internal Revenue Service granted Genesee Health Care tax exempt status under Section 501(c)(4) of the Internal Revenue Code. Federal qualification as an HMO was granted on October 1, 1979, and a federal operating assistance loan to cover initial operating deficits was obtained.

On October 15, 1979, Genesee Health Care began operation as a state-licensed, federally-qualified, health maintenance organization operating in Genesee, Lapeer, and Shiawassee counties and signed its first employer group on October 20 of that year. The addition of several counties to our service area in the early 1980s indicated that Genesee Health Care needed another name change, and in 1986, Genesee Health Care officially became HealthPlus of Michigan, Inc. At present HealthPlus’ approved service area encompasses all or part of 18 mid-Michigan counties (see current service area map).

Membership
Membership has grown from an initial 1,000 members in early 1980 to approximately 186,000 members today (see membership trend graph). Approximately 56,000 of HPM’s members are employees and their dependents of General Motors and Delphi corporations. HPM is General Motors’ largest independent HMO and second largest carrier next to Blue Cross/Blue Shield of Michigan. Many of these General Motors/Delphi employees are represented by the United Auto Workers (UAW). In fact, approximately 40,000 UAW subscribers including dependents are enrolled with HealthPlus. Commercial membership is also drawn from state, county, and municipal employer groups, as well as other private sector employers. Other major HealthPlus clients include Consumers Energy, Meijer, Genesys Health System, Hurley Medical Center, Covenant Health System, Dow Corning, and Eaton Corporation.

In 1995, HealthPlus decided to begin participation in the State of Michigan’s Medicaid program as a qualified health plan. The State of Michigan chose to mandate membership in managed health plans for most individuals eligible for Medicaid coverage. As of January 2004, Medicaid-sponsored membership stands at 58,000, approximately 51 percent of the eligible population living in HealthPlus’ service area.

HealthPlus also provides Medicare coverage through two programs. The Medicare Supplemental product consists mainly of General Motors retirees and includes other members through smaller company, employer-based programs. As General Motors employees age, the number of Medicare-eligible retirees increases; therefore, the successful management of this product line is important to General Motors. Today, approximately 8,000 General Motors and other employers’ former employees participate in this program. Also, in response to General Motors’ interest in managing the health care and cost of its retirees, HealthPlus transitioned over 1,000 General Motors salaried retirees in the Greater Flint Area from the Medicare Supplemental product to the Medicare Advantage program as of January 2001.

The Medicare Advantage program is also available to those individuals who do not have employer-paid supplemental coverage. This program is structured as a full “risk” arrangement with the Centers for Medicare and Medicaid Services (CMS) of the federal government. As of January 2004, HealthPlus serves 2,700 individuals through the Medicare Advantage program.

Current Corporate Structure
HealthPlus provides products to purchasers and services to members through three certified licensed entities. HealthPlus owns two subsidiaries and is affiliated with a third through a joint venture arrangement.

HealthPlus of Michigan, Inc.
HealthPlus of Michigan, Inc. is a Michigan-based, non-profit corporation. As such, it is regulated pursuant to the Nonprofit Business Corporation Act of 1982. HPM’s corporate functioning must then conform to the requirements of the Nonprofit Business Corporation Act in order to maintain its proper corporate status and for the corporation to be recognized as a separate legal entity.

HPM is also a membership-based corporation. While most corporations are stock-based and shareholders (or stockholders) have both an economic and voting interest in the corporation, HPM has only members - as established by contract status. The contract holders have no economic interest in the organization, but do have voting interests recognized principally through the election of the Board of Directors. In addition, significant corporate actions also require the voting of the membership. Currently, Commercial and Medicare products are administered through HealthPlus of Michigan.

For Internal Revenue Services purposes, HPM is a tax-exempt corporation. Its tax exemption is as a social welfare organization pursuant to 501(c)(4) of the Internal Revenue Code. This classification makes HPM exempt from income and certain other taxes. HealthPlus, however, is not a charitable or benevolent organization, and has not enjoyed the benefit of having contributors being able to take a charitable tax contribution. As a tax exempt corporation pursuant to Section 501(c)(4), HealthPlus is nonetheless prohibited from engaging in many types of conduct, most notably allowing surplus or profit to inure to any individual or undertaking any political venture.

HealthPlus Options
HealthPlus Options, Inc. (HPO) is a non-profit stock company owned entirely by HealthPlus of Michigan. HPO is licensed in Michigan as a Third Party Administrator (TPA). This means that HPO can enter into contracts with purchasers of health care to pay medical claims. These self-funded arrangements do not involve the transaction of insurance. Rather, the purchaser remains fiscally responsible for paying for health care services. HPO acts as their agent in paying medical claims. A five-member Board elected by HPM governs HPO. An administrative agreement exists so that HPM provides all necessary administrative services for HPO. Accordingly, HPO has no employees. HPO is not a tax-exempt corporation.

HealthPlus Partners, Inc.
HealthPlus Partners, Inc. (HPP) is a non-profit stock company owned entirely by HealthPlus of Michigan. HPP is certified in Michigan as an HMO. HPP was established and certified in 2002 in order to conduct Medicaid business. A change in state law implemented in 2002 imposed a revenue tax on all Michigan HMOs which held Medicaid contracts. All revenue (not just Medicaid revenue) is taxed. As a result, HealthPlus transferred its Medicaid contract to a newly formed subsidiary (HealthPlus Partners) to avoid the taxation of non-Medicaid revenue. HPP is governed by a six-member Board. Four members are elected by HPM, and two members are elected by adult Medicaid subscribers. Like HPO, HPP has no employees and relies upon HPM for the provision of administrative services. HPP may apply to become a tax-exempt corporation.

HGH, Inc.
HGH, Inc. (HGH) is a non-profit membership-based corporation. HGH is a joint venture formed in late 1994 between Hurley Medical Center, Genesys Regional Medical Center and HealthPlus of Michigan. HGH was formed to create a business structure to represent the mutual business interests between HPM and Flint-area hospitals in delivering services to the Medicaid population. In 1996, Memorial Health Care Center of Owosso became a member of HGH. In 2002, HealthPlus of Michigan transferred its membership interest in HGH to HealthPlus Partners.

Licensing, Regulation, and Accreditation
The main regulatory arm of the federal government providing oversight to HealthPlus is the Centers for Medicaid Services (CMS). In that regard, HealthPlus also has been granted a contract through CMS to provide health care coverage to Medicare beneficiaries. The contract is called a “Medicare+Choice” contract, and the HealthPlus program is called “HealthPlus Senior."

HealthPlus of Michigan is also a state-certified HMO. Certification takes place pursuant to a specific chapter of the Michigan Insurance Code. Regulatory oversight is provided by the Office of Financial and Insurance Services (OFIS). In order to conduct its core business, HealthPlus must stay in compliance with the pertinent provisions of the Insurance Code and any regulations or directives issued by OFIS.

HealthPlus also maintains private accreditation. The National Committee for Quality Assurance (NCQA) reviews health organizations on areas of clinical quality. Organizations are assessed based upon NCQA’s rigorous standards within six areas: quality improvement, utilization management, provider credentialing, member rights & responsibilities, medical records, and preventive health. Health plans choose to participate in the review process, and since 1992, HealthPlus has undergone four reviews. In May of 1997 HealthPlus was granted Full Accreditation, the highest rating available to a health organization. Our most recent NCQA accreditation review in late 2001 resulted in HealthPlus receiving Full Accreditation in the Commercial product line for a third time, and also Full Accreditation for the Medicaid and Medicare product lines.