Responding to some members' need to raise capital, the national Blue Cross and Blue Shield Association has lifted its historic ban on member plans becoming publicly traded for-profit companies.
The association's board of directors adopted the new policy at its annual meeting June 23-24 in Dallas, but didn't announce the change until last week.
"We believe only a handful of plans will convert to for-profit companies, and that will occur over a period of time, not immediately," said Susan Barrish, vice president of licensure and financial services for the Chicago-based insurance trade association.
The new policy essentially amends the licensing agreement between the association and the 69 Blues plans around the country. The agreement had prohibited plans that use the Blue Cross name from being for-profit companies.
At present, all the plans are not-for-profit corporations. They operate 192 subsidiary managed-care plans, some of which are for-profit organizations. An association spokeswoman said the group doesn't know how many of the managed-care plans are for-profit.
The most famous of the Blues' for-profit operations to date is Wellpoint Health Networks, which was spun off from Blue Cross of California in 1993. Blue Cross recently agreed to make an additional $100 million in charitable donations to compensate California for the conversion to for-profit status (June 6, p. 17).
The association lifted the ban to allow plans greater access to capital, Ms. Barrish said. Some plans may need additional revenues to better compete with the integrated delivery systems being formed across the country because of national healthcare reform, she said. Currently, the only alternatives for raising cash are increasing premiums or borrowing money, she said.
Creating parity between Blues plans and other insurers has been a top policy priority for the association. Last December and again in April, the association testified before Congress on the need to subject all affordable health plans developed under national healthcare reform legislation to the same tax rules.
Although all Blues plans are not-for-profit organizations, Congress stripped them of their federal income-tax exemption in 1986. They do, however, continue to receive other tax benefits, such as a special deduction for a portion of their financial reserves.