New Role for Blue Cross?

January 16, 1991

What should be the role of Blue Cross and Blue Shield of Maryland in this state's health-care marketplace?

Blue Cross says it needs to be freed from its special non-profit status to do its best as the state's largest health-care provider. The latitude to offer subscribers such services as credit cards or a form of life insurance would enhance its competitive edge, ultimately lowering benefit costs to members and easing the way for affordable coverage to thousands of uninsured Marylanders. In exchange, Blue Cross says it is willing to pay Maryland's 2 percent premium tax.

But last month, Insurance Commissioner John A. Donaho nixed the plan because he said a level playing field for Blue Cross isn't necessarily in the best interest of policy holders. Abandoning its tax-exempt status would cost Blue Cross $8 million to $10 million in higher annual tax payments. Where would the money come from? The company says higher investment yields. Mr. Donaho suspects it might also require higher rates and, barring strenuous oversight, a gradual move away from its stated mission.

Blue Cross, created under special 1937 legislation to cover the cost of care at a dozen or so hospitals, is now a huge, diverse health insurer by virtue of decades of legal patchwork and

marketplace permutations. Given the enormity of the competition, Blue Cross claims it is unfairly hamstrung by a regulatory yoke not imposed on its rivals. Recent competitive forays, including an attempt to revoke health-care coverage for drunk drivers and a medical credit card, for example, have been challenged. Its efforts to offer low-cost health benefits to more than half a million uninsured Marylanders, meanwhile, have been thwarted by laws governing mandatory benefits.

Here is one option worth exploring: an experimental period in which Blue Cross could operate as a mutual company. Then the insurance commissioner could evaluate the results. But first Blue Cross would have to have adequate reserves in place to offset its higher tax payments. It should also give assurance that subscriber rates would not be affected by this experiment. This would give Blue Cross a chance to prove the merits of operating as a mutual insurance company while posing no risk to its subscribers.

With the vast changes in the health-care and insurance industries, the time has come to take another look at Blue Cross. New approaches should not be foreclosed without giving the company a crack at making them work.

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