Crain's Detroit Business Holiday Edition - (Page 1)

® www.crainsdetroit.com ©Entire contents copyright 2009 by Crain Communications Inc. All rights reserved DECEMBER 2009 HOLIDAY EDITION $2 a copy; $59 a year Page 3 Reform’s taxes ‘significant’ Health insurers: New subscribers won’t counter impact BY JAY GREENE CRAIN’S DETROIT BUSINESS Aerospace firm rehiring with orders on the rise This Just In ILS won’t appeal dismissal of lawsuit against Asterand Tissue bank company ILSBio L.L.C. will not appeal a lawsuit dismissal in favor of Detroit-based Asterand plc in Detroit for breach of contract and misappropriation of trade secrets. The time to mount an appeal expired this month before U.S. District Judge Bernard Friedman, in a lawsuit alleging Asterand began discussions to acquire ILSBio but instead hired the exwife of its CEO and acquired trade secrets. Friedman denied Maryland-based ILSBio’s preliminary injunction request and dismissed the case in November. “We had a mini-trial on their motion for injunction and argued the merits of that,” said Thomas Schehr, member-shareholder at Dykema Gossett P.L.L.C. and lead counsel for Asterand. ILS sought damages and an injunction to block Asterand’s use of ILS secrets, including human tissue supply sites. After acquisition talks in May, the lawsuit claims, Asterand induced Asa Thorp, ex-wife of CEO Richard Thorp, to “quit her job at ILS, become an Asterand employee and use her ILS-related relationships with personnel at Vietnam sites to enable Asterand to circumvent ILS’ tissue supply sites.” — Chad Halcom Several Southeast Michigan health insurance executives are objecting to provisions in a health care reform bill in the U.S. Senate that would impose a $6.7 billion annual tax on insurers in 2010 to help pay for covering more than 33 million currently uninsured people starting in 2014. The executives also oppose $25 billion in additional taxes that go into effect in 2014, 2015 and 2016 and an excise tax on high-cost health insurance policies that would raise another $149 billion beginning in 2013. “We estimate the impact to be fairly significant,” said Ron Stallworth, vice president of government affairs with Health Alliance Plan of Michigan in Detroit. “As far as the dollar figure (of the total annual tax liability), it would exceed the operating (profits) for 2008,” said Stallworth. “It is hard to operate under those cir- “ The down-theroad impact would be more to subscribers and members. ” Ron Stallworth, Health Alliance Plan of Michigan cumstances. The down-the-road impact would be more to subscribers and members because this tax on the industry amounts to a tax on everyday (customers).” In 2008, HAP earned net income of $19.5 million on revenue of $1.66 billion, according to the Michigan Office of Financial and Insurance Regulation. Unlike investorowned health insurers, HAP reinvests its 1.2 percent profit margin into operations or state-mandated reserve accounts, Stallworth said. The insurance tax would cost Blue Cross Blue Shield of Michigan about $131 million a year, said Andy Hetzel, Blue Cross’ vice president for corporate communications. Blue Cross reported a companywide loss of $145 million in 2008 on revenue of $21.2 billion. For the first six months of 2009, the Blues reported a $46.8 million loss. “The tax will have a significant impact,” he said. “It is levied on the industry, based on market share, regardless of whether the plan is for-profit or nonprofit. You pay the same tax load regardless of the business model you have.” But supporters of the health care reform bill, including U.S. Sen. Debbie Stabenow, D-Mich., contend the taxes are fair because the health insurers stand to gain millions of new customers when the individual health insurance mandate becomes effective in 2014. According to a study by the Centers for Medicare and Medicaid Ser- vices, an estimated 20 million previously uninsured people are expected to eventually purchase private health insurance, generating billions of dollars of revenue for the insurance industry. Low-income people would receive federal subsidies, partly paid for by taxes from the Insurers: Cuts will raise premiums insurance, medical device for seniors, and cosmetic Page 2 surgery industries. Another 18 million would become eligible for Medicaid, and many of those are expected to join Medicaid HMO plans, which are administered by private insurers. But Kim Horn, CEO of Priority Health, which operates an office in Farmington Hills, said the $95-peryear penalties that go into effect in 2014 for individuals who do not purchase health insurance are too low. The penalties increase each year and top out at $750 in 2016. “While taxes on health insur- MEDICARE See Reform, Page 2 Bill opens infrastructure projects to investors BY AMY LANE CAPITOL CORRESPONDENT LANSING — Legislation that could encourage private investors to fund public transportation infrastructure is on the move in the Capitol. Under House Bill 5461, investors who front money needed for projects large and small — such as turn lanes, intersection upgrades, parking facilities and transit-related improvements — would be repaid and potentially profit from property-tax growth in the project’s area. The concept, called private investment infrastructure funding, or PIIF, was first proposed by the Oakland County Business Roundtable and is being discussed as lawmakers, local officials and business look at ways to help with Michigan’s transportationfunding straits. “This is not the answer to everything. We still have seriKiriluk ous operating shortfalls in the road infrastructure funding sources,” said Alan Kiriluk, chairman of Troy-based Kirco Development Corp. “This is a new mechanism that creates a new funding source. Community stakeholders can invest in their community. “There’s so many projects that this can apply to.” Kiriluk is chairman of the Oakland roundtable’s transportation committee and chairman of Businesses for Better Transportation. The bill, sponsored by Rep. Tonya Schuitmaker, R-Lawton, and passed by the House Transportation Committee last week, would set up a new approach for funding infrastructure improvements related to roads, drainage, sewers, transit and other uses. For a project to move forward, a “negotiating partnership” would be formed consisting of the local municipality, the public agency with jurisdiction over the infrastructure, like a road commission, or the county. The partnership would analyze the feasibility and need for the project and identify the area around the project in which property-tax increases, resulting from higher property values, would be captured. The partnership would negotiate a rate of the return with the investor, based on the estimated property-tax growth over the periSee Projects, Page 7 For franchises, any Pizza Bowl matchup looks like a win BY BILL SHEA CRAIN’S DETROIT BUSINESS It’s not the ideal team matchup, but the television exposure from the Dec. 26 Little Caesars Pizza Bowl is expected to be a marketing boost for the pizza chain’s more than 2,500 franchises. Billed by Sports Illustrated as the least interesting of the 36 major college football bowl games, pitting Ohio University (9-4) against Marshall University (6-6) at down- town Detroit’s Ford Field, the event is nonetheless seen as a positive by the chain. “Regardless of who the teams are, the exposure we get … there’s no bad publicity,” said Todd Messer, executive director of the Little Caesars Franchise Association, whose members own about 1,000 of the Detroit-based chain’s stores. “At this point, the exposure has been everything we thought it would be.” That exposure so far has chiefly been through in-store promotional contests (which ended before the teams were announced earlier this month), broadcast commercials and will culminate with the bowl’s 1 p.m. broadcast on ESPN. Messer said he’s not yet seen participation statistics from the in-store contests, so he doesn’t know how well the bowl tie-in has been received. Little Caesars officials declined See Pizza Bowl, Page 2 “ You have to really, really love bowl games to be pumped up for this. would say “ Istill good forit’s the franchises. ” T. Bettina Cornwell, University of Michigan ” Scout.com http://www.crainsdetroit.com http://www.Scout.com http://www.Scout.com

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Crain's Detroit Business Holiday Edition