Blues can become for-profit companies

June 30, 1994|By New York Times News Service

Reversing a 60-year tradition of nonprofit health service, the national Blue Cross and Blue Shield Association said yesterday that it would allow its member plans to become for-profit companies that could sell stock to the public.

Blue Cross executives said about a dozen of the 69 Blue Cross plans across the country were seriously considering becoming for-profit companies. The move would enable them to raise money from investors in order to compete in the rapidly changing national health care market.

"We want the same access to the capital markets as the other players," said Norwood H. Davis Jr., chairman and chief executive of Virginia Blue Cross and Blue Shield.

Blue Cross plans provide health coverage for 67 million people, roughly one in four Americans, including 27 million who are in Blue Cross-sponsored health maintenance organizations and other managed-care networks.

In many parts of the country, the Blue Cross and Blue Shield organizations compete with well-financed insurance companies and health maintenance organizations, many of which have been combining amid a surge of consolidations by health care insurers and providers.

For example, two giant insurers, Metropolitan Life, a mutual insurance company owned by its policyholders, and Travelers, owned by shareholders, recently agreed to merge their health-care business in a huge joint venture.

The 69 Blue Cross plans reported a combined surplus of $2.7 billion last year on revenue of $71 billion, even though there are financial problems at several plans, including Blue Cross and Blue Shield of Maryland. Still, the District of Columbia plan was the only one that ran a deficit.

"There is lots of action on Wall Street, where HMOs are doing deals," said Tom Kinser, chief operating officer of national Blue Cross. "Money is a way of lubricating a deal."

He added that the primary mission of the Blue Cross group was "still to make high-quality health care available at the lowest possible cost."

Some critics of the nation's existing health care system assailed the policy change, which was hotly debated for 18 months by the regional Blue Cross executives.

"We think this is very bad to have the delivery of health care in the hands of profit-making organizations," said Dr. James S. Todd, executive vice president of the American Medical Association.

For such organizations, Dr. Todd said, "healthy profits become more important than healthy patients."

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