BLUE CROSS/BLUE SHIELD: PROBING FOR-PROFIT CONVERSIONS
While the "venerable national network" of Blue Cross andThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
Blue Shield health insurers have "existed as altruistic, tax-
exempt social welfare organizations ... for most of their 60
years" in business, at least 16 Blues are "now contemplating or
undergoing" for-profit conversions. According to U.S. NEWS &
WORLD REPORT, the controversy surrounding the sale of Ohio Blue
Cross/Blue Shield to for-profit hospital titan Columbia/HCA
Healthcare Corp. is part of "a much wider battle" over who
"should benefit from" the Blues' combined $75 billion in assets.
The Blues are turning for-profit in response to a "competitive
marketplace" and a "debate is raging" over whether management,
shareholders, directors, policyholders or the public has rights
to the assets.
NEED MARKET FREEDOM: U.S. NEWS notes that while the Blues
were "[s]low at first to respond to the challenge of managed
care, many Blues are now embracing it with a vengeance." The
shift to for-profit status began in 1994 when the national Blue
Cross and Blue Shield Association stopped restricting membership
to nonprofit companies. U.S. NEWS reports that the move was "a
reaction to the Blues' steep loss of market share to fast-
growing, for-profit HMOs;" enrollment in Blues plans has fallen
from 87 million in 1980 to 66 million this year.
THE FOUNDATIONS: While most states require Blues that
convert to for-profit to contribute the value of their assets to
a charitable foundation, the size and scope of the insurers'
responsibility is subject to "a messy process in which political
lobbying, pressure from consumer groups and the leanings of
public officials determine the outcome state by state." Blue
Cross of California was required to establish two health care
foundations with stock and cash totaling more than $3 billion.
However, Blue Cross/Blue Shield of Georgia was not required to
establish a foundation and its stock sales have been questioned
for conflicts-of-interest. It is "still uncertain" whether Blues
in Ohio, New Jersey, Connecticut and Missouri, where for-profit
"deals have gone through or been proposed," will have to
establish foundations. Noting that the for-profit conversion of
Empire Blue Cross/Blue Shield would "put 100% of its worth into a
new foundation," U.S. NEWS reports, "For the moment, the forces
that want to keep the Blues' wealth working for charity seem to
have the advantage" (Sherrid, 11/4 issue).