Mich. Comp. Laws » Michigan Compiled Laws / Chapter 550 / Act 350 of 1980
Michigan Compiled Laws

Mich. Comp. Laws § 550.1402 (2026)

Health care corporation; prohibited conduct; commission or compensation; new preexisting condition limitation waiting period; readjusting rates; participation in trade practice conference for disability insurers; provider class plan not altered or superseded; probable cause to believe provisions violated; notice; disposition of matter by agreement of parties; action for damages; hearing; issuance of cease and desist order; violation of cease and desist order; civil fine; action for actual monetary damage; attorneys' fees.

✓ current as of July 2026
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THE NONPROFIT HEALTH CARE CORPORATION REFORM ACT


Act 350 of 1980


550.1402 Health care corporation; prohibited conduct; commission or compensation; new preexisting condition limitation waiting period; readjusting rates; participation in trade practice conference for disability insurers; provider class plan not altered or superseded; probable cause to believe provisions violated; notice; disposition of matter by agreement of parties; action for damages; hearing; issuance of cease and desist order; violation of cease and desist order; civil fine; action for actual monetary damage; attorneys' fees.

Sec. 402.

    (1) A health care corporation shall not do any of the following:

    (a) Misrepresent pertinent facts or certificate provisions relating to coverage.

    (b) Fail to acknowledge promptly or to act reasonably and promptly upon communications with respect to a claim arising under a certificate.

    (c) Fail to adopt and implement reasonable standards for the prompt investigation of a claim arising under a certificate.

    (d) Refuse to pay claims without conducting a reasonable investigation based upon the available information.

    (e) Fail to affirm or deny coverage of a claim within a reasonable time after a claim has been received.

    (f) Fail to attempt in good faith to make a prompt, fair, and equitable settlement of a claim for which liability has become reasonably clear.

    (g) Compel members to institute litigation to recover amounts due under a certificate by offering substantially less than the amounts due.

    (h) By making reference to written or printed advertising material accompanying or made part of an application for coverage, attempt to settle a claim for less than the amount which a reasonable person would believe was due under the certificate.

    (i) For the purpose of compelling a member to accept a settlement or compromise in a claim, make known to the member a policy of appealing from administrative hearing decisions in favor of members.

    (j) Attempt to settle a claim on the basis of an application which was altered without notice to, or knowledge or consent of, the subscriber under whose certificate the claim is being made.

    (k) Delay the investigation or payment of a claim by requiring a member, or the provider of health care services to the member, to submit a preliminary claim and then requiring subsequent submission of a formal claim, seeking solely the duplication of a verification.

    (l) Fail to promptly provide a reasonable explanation of the basis for denial of a claim or for the offer of a compromise settlement.

    (m) Fail to promptly settle a claim where liability has become reasonably clear under 1 portion of a certificate in order to influence a settlement under another portion of the certificate.

    (2) In order to induce a person to contract or to continue to contract with the health care corporation for the provision of health care benefits or administrative or other services offered by the corporation; to induce a person to lapse, forfeit, or surrender a certificate issued by the health care corporation; or to induce a person to secure or terminate coverage with another health care corporation, insurer, health maintenance organization, or other person, a health care corporation shall not, directly or indirectly:

    (a) Issue or deliver to the person money or any other valuable consideration.

    (b) Offer to make or make an agreement relating to a certificate other than as plainly expressed in the certificate.

    (c) Offer to give or pay, or give or pay, directly or indirectly, a rebate or part of the premium, or an advantage with respect to the furnishing of health care benefits or administrative or other services offered by the corporation except as reflected in the rate and expressly provided in the certificate.

    (d) Make, issue, or circulate, or cause to be made, issued, or circulated, any estimate, illustration, circular, or statement misrepresenting the terms of a certificate or contract for administrative or other services, the benefits thereunder, or the true nature thereof.

    (e) Make a misrepresentation or incomplete comparison, whether oral or written, between certificates of the corporation or between certificates or contracts of the corporation and another health care corporation, health maintenance organization, or other person.

    (3) A health care corporation shall not provide a commission or other compensation to the health care corporation's agent or employee for the sale or service of a health care benefits certificate issued to an individual eligible for medicare, unless the amount of the commission or compensation paid in the first year of the certificate is not more than the amount of the commission or compensation that the health care corporation's agent or employee receives for the certificate in each of the 2 subsequent, consecutive annual renewal periods.

    (4) A health care corporation shall not issue a certificate to an individual eligible for medicare that provides for a new preexisting condition limitation waiting period if coverage is converted to or replaced by a new or other form of similar coverage with the same health care corporation or any of the health care corporation's affiliates. If the preexisting condition limitation waiting period in the original or replaced certificate has not expired, the replacing certificate may include the remaining term of the preexisting condition limitation waiting period of the replaced certificate. This subsection does not apply to an increase in benefits voluntarily selected by the individual.

    (5) Nothing in subsection (2) shall prevent a health care corporation from readjusting the rates charged to a subscriber group which is experience-rated based on the previous claims of the group.

    (6) The commissioner shall allow a health care corporation to participate in any trade practice conference for disability insurers convened under section 2047 of Act No. 218 of the Public Acts of 1956, being section 500.2047 of the Michigan Compiled Laws, and may bind a health care corporation to any rules promulgated as provided in that section.

    (7) Nothing in this section shall alter or supersede any provider class plan established pursuant to part 5.

    (8) If the commissioner has probable cause to believe that a health care corporation is violating, or has violated subsection (1), indicating a persistent tendency to engage in conduct prohibited by that subsection, or has probable cause to believe that a health care corporation is violating, or has violated subsection (2), (3), or (4), he or she shall give written notice to the corporation, pursuant to the administrative procedures act of 1969, Act No. 306 of the Public Acts of 1969, being sections 24.201 to 24.328 of the Michigan Compiled Laws, setting forth the general nature of the complaint against the corporation and the proceedings contemplated under this section. Before the issuance of a notice of hearing, the staff of the bureau of insurance responsible for the matters which would be at issue in the hearing shall give the corporation an opportunity to confer and discuss the possible complaint and proceedings in person with the commissioner or a representative of the commissioner, and the matter may be disposed of summarily upon agreement of the parties. This subsection shall not be construed to diminish the right of a person to bring an action for damages under this section.

    (9) A hearing held pursuant to subsection (8) shall be held in accordance with section 2030 of the insurance code of 1956, Act No. 218 of the Public Acts of 1956, as amended, being section 500.2030 of the Michigan Compiled Laws. The hearing shall be held pursuant to the administrative procedures act of 1969, Act No. 306 of the Public Acts of 1969. If, after the hearing, the commissioner determines that the health care corporation is violating, or has violated subsection (1), indicating a persistent tendency to engage in conduct prohibited by that subsection, or is violating, or has violated subsection (2), (3), or (4), the commissioner shall reduce his or her findings and decision to writing, and shall issue and cause to be served upon the corporation a copy of the findings and an order requiring the corporation to cease and desist from engaging in the prohibited activity. The commissioner may at any time, by order, and after notice and opportunity for a hearing, reopen and alter, modify, or set aside, in whole or in part, an order issued by him or her under this subsection, when in his or her opinion conditions of fact or law have so changed as to require that action, or if the public interest so requires.

    (10) A health care corporation which violates a cease and desist order of the commissioner issued under subsection (9), after notice and an opportunity for a hearing, and upon order of the commissioner, may be subject to a civil fine of not more than $10,000.00 for each violation.

    (11) In addition to other remedies provided by law, an aggrieved member may bring an action for actual monetary damages sustained as a result of a violation of this section. If successful on the merits, the member shall be awarded actual monetary damages or $200.00, whichever is greater, together with reasonable attorneys' fees. If the health care corporation shows by a preponderance of the evidence that a violation of this section resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error, the amount of recovery shall be limited to actual monetary damages.

History: 1980, Act 350, Eff. Apr. 3, 1981 ;-- Am. 1989, Act 132, Eff. Nov. 1, 1989

Constitutionality Notes:

    This act is unconstitutional in the following three particulars:

    (1) The act's provision for an actuary panel to resolve risk factor disputes is an unconstitutional delegation of legislative authority in that it lacks adequate standards (MCL 550.1205(6)).

    (2) The statutory restrictions on administrative services only (ASO) contracts violate equal protection of the laws insofar as they result in arbitrary and discriminatory treatment of health care corporations vis-a-vis commercial insurers (MCL 550.1104(3), 550.1211, 550.1414a, 550.1415, and 550.1607(1)).

    (3) The commissioner's authority to issue a cease and desist order based on probable cause against a health care corporation for noncompliance with the act establishes an improper burden of proof (MCL 550.1402(7)).

    The Supreme Court ruling on these three areas of this act does not affect the constitutionality of the remainder of the act. Where, as here, the unconstitutional provisions are easily severable, the remainder of the act need not be affected. Blue Cross and Blue Shield of Michigan v Governor, 422 Mich 1; 367 NW2d 1 (1985).

PopularName Notes:

Blue Cross-Blue Shield

PopularName Notes:

Act 350
Notes of Decisions
Cited in 8 cases, 1985–2019 · leading case: Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005).
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Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). · cites it 12× “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
Foster v. Blue Cross & Blue Shield of Michigan, 969 F. Supp. 1020 (E.D. Mich. 1997). · cites it 12× “Plaintiff also argues that Defendant violated section 550.1402, which states: (1) A health care corporation shall not do any of the following: (a) Misrepresent pertinent facts or certificate provisions relating to coverage.”
Blue Cross & Blue Shield v. Governor, 367 N.W.2d 1 (Mich. 1985). “59 MCL 550.1402(7), (8); MSA 24.660(402X7), (8).”
BPS Clinical Labs. v. Blue Cross & Blue Shield, 552 N.W.2d 919 (Mich. Ct. App. 1996). “The only private right of action directly against a health care corporation authorized by the act is an action by a subscriber against a health care corporation for damages.”
Genesis Ctr., PLC v. Blue Cross & Blue Shield, 625 N.W.2d 37 (Mich. Ct. App. 2001). · cites it 2× “lue Shield">217 Mich App 687, 698 ; 552 NW2d 919 (1996), Detroit Area Agency on Aging v Office of Services to the Aging, *695 210 Mich App 708, 716-717 ; 534 NW2d 229 (1995), and MCL 550.1402(11); MSA 24.660(402)(11), plaintiffs did not have standing to bring a cause of action…”
Tzvih Tinman v. Blue Cross & Blue Shield of Michigan (Mich. Ct. App. 2015). · cites it 10× “1418 also comprises a violation of MCL 550.1402, it must be determined with respect to each claimant whether the claimant was provided emergency health services “for medically necessary services” resulting from “the sudden onset of a medical condition that manifest[ed] itself by…”
Blue Cross & Blue Shield v. Comm'r of Ins., 445 N.W.2d 215 (Mich. Ct. App. 1989). · cites it 2× “The providers then sought review and determination of the matter by the commissioner, pursuant to §404(3), alleging that bcbsm’s postpayment audit procedure violated certain portions of MCL 550.1402; MSA 24.660(402) and MCL 550.”
Tzvih Tinman v. Blue Cross Blue Shield of Michigan (Mich. Ct. App. 2019). · cites it 2× “The statute expressly applies to attorney fee and other costs, Ayar, 472 Mich at 717 , and the judgment in this case is comprised of attorney fees awarded to defendant pursuant to -3- MCL 550.1402(11),1 a provision of the Nonprofit Health Care Corporation Reform Act, MCL 550.”
— Mich. Comp. Laws § 550.1402(1)(a) — 1 case
Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
— Mich. Comp. Laws § 550.1402(100) — 1 case
Tzvih Tinman v. Blue Cross & Blue Shield of Michigan (Mich. Ct. App. 2015). “1418 also comprises a violation of MCL 550.1402, it must be determined with respect to each claimant whether the claimant was provided emergency health services “for medically necessary services” resulting from “the sudden onset of a medical condition that manifest[ed] itself by…”
— Mich. Comp. Laws § 550.1402(11) — 5 cases
BPS Clinical Labs. v. Blue Cross & Blue Shield, 552 N.W.2d 919 (Mich. Ct. App. 1996). “The only private right of action directly against a health care corporation authorized by the act is an action by a subscriber against a health care corporation for damages.”
Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
Genesis Ctr., PLC v. Blue Cross & Blue Shield, 625 N.W.2d 37 (Mich. Ct. App. 2001). “lue Shield">217 Mich App 687, 698 ; 552 NW2d 919 (1996), Detroit Area Agency on Aging v Office of Services to the Aging, *695 210 Mich App 708, 716-717 ; 534 NW2d 229 (1995), and MCL 550.1402(11); MSA 24.660(402)(11), plaintiffs did not have standing to bring a cause of action…”
Tzvih Tinman v. Blue Cross & Blue Shield of Michigan (Mich. Ct. App. 2015). “1418 also comprises a violation of MCL 550.1402, it must be determined with respect to each claimant whether the claimant was provided emergency health services “for medically necessary services” resulting from “the sudden onset of a medical condition that manifest[ed] itself by…”
Tzvih Tinman v. Blue Cross Blue Shield of Michigan (Mich. Ct. App. 2019). “The statute expressly applies to attorney fee and other costs, Ayar, 472 Mich at 717 , and the judgment in this case is comprised of attorney fees awarded to defendant pursuant to -3- MCL 550.1402(11),1 a provision of the Nonprofit Health Care Corporation Reform Act, MCL 550.”
— Mich. Comp. Laws § 550.1402(7) — 1 case
Blue Cross & Blue Shield v. Governor, 367 N.W.2d 1 (Mich. 1985). “59 MCL 550.1402(7), (8); MSA 24.660(402X7), (8).”
— Mich. Comp. Laws § 550.1402(H) — 1 case
Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
— Mich. Comp. Laws § 550.1402(l)(a) — 1 case
Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
— Mich. Comp. Laws § 550.1402(l)(d) — 1 case
Tinman v. Blue Cross & Blue Shield, 692 N.W.2d 58 (Mich. Ct. App. 2005). “*551 Plaintiff also asserted in count one that, by allegedly denying coverage on the basis of the final diagnosis, defendant violates MCL 550.1402. MCL 550.1402(1)(a) prohibits health care corporations from “[misrepresenting] pertinent facts or certificate provisions relating to…”
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