RENEE MONTAGNE, host:
Some political theater recently in Congress focused on Anthem Blue Cross of California, an insurance company raising its rates nearly 40 percent. Those in favor of the health care bill pointed to this increase and said that's what happens when regulators can't control the insurance industry. Yet, when it started, Blue Cross had a charitable mission.
From member station KQED, Sarah Varney looks back.
SARA VARNEY: It may be hard to imagine now, but back in the 1930s, membership in a Blue Cross plan was practically a civic duty. Boy Scouts handed out enrollment brochures and preachers urged their congregation to enroll.
Blue Cross and Blue Shield plans formed as not-for-profits to give communities access to medical care and protect against personal financial ruin. All members paid the same amount no matter how old or sick, and no one was turned away. The Blues became one of the most trusted brands in America.
Mr. FAHEY FLYNN (News Anchor): How do you do, ladies and gentlemen? I'm Fahey Flynn with tonight's CBS News Special, brought to you as a public service by Blue Cross and Blue Shield. And to bring us up...
VARNEY: By the 1970s and '80s, though, Blue plans faced competition from for-profit insurance companies. Because the Blues accepted all comers, regardless of health status, their rates were typically higher. These new insurers who didn't offer universal coverage attacked younger, healthier people with better deals. In response, most Blue plans started charging sicker and older people more. Even so, Blue plans around the country were losing market share.
Ms. LAURIE SOBEL (Attorney, Consumers Union): There was basically mounting pressure from the plans that wanted to become for-profit.
VARNEY: Laurie Sobel is an attorney with Consumers Union. She says many Blue plans saw the stock market as their savior. If they became for-profit, publically traded companies, they could sell stock and raise a lot of cash.
So in 1994, the Blue Cross Blue Shield Association made a big change. For the first time, they would allow their franchises to convert from nonprofit charities to for-profit public companies. Blue Cross of California was the first to do so and became WellPoint Health Networks. Mark Smith, president of the California Health Care Foundation, says WellPoint wanted to buy up Blue plans in other states so they could sell their insurance products to national companies.
Mr. MARK SMITH (President, California Health Care Foundation): Clearly, part of what Blue Cross intended and, in fact, did, was use the capital that they raised from stock sales to acquire other companies to grow, to get bigger, and in so doing, put them in a position where they could sell to national accounts, 'cause that's where a lot of the money is in the group health insurance market.
VARNEY: WellPoint bought non-profit Blue plans in Missouri, Wisconsin and elsewhere. At the same time, Anthem, the for-profit owner of Indiana's Blue plan, went on a multi-state buying spree of its own. Then in 2004, WellPoint and Anthem merged and became the largest health insurance company in the country. And that meant the non-profit Blue plans that remained faced an even tougher marketplace, says Laurie Sobel of Consumers Union.
Ms. SOBEL: They are competing in a marketplace for those for-profits. So they have been doing some of the same bad practices as the for-profits.
VARNEY: While many Blue plans remain not-for-profit, Chris Conover, a Duke University researcher, says the for-profit and not-for-profit Blues are now indistinguishable.
Mr. CHRIS CONOVER (Researcher, Duke University): For 90 or 95 percent of their business decisions, they're going to make the same business decision. And then at the margin, maybe the for-profit plan is going to be a little more aggressive about, I don't know, their provider contracting or something like that.
VARNEY: Sobel of Consumers Union says something larger has been sacrificed. As Blue plans across the country went for-profit, the original mission of Blue Cross Blue Shield has been lost.
Ms. SOBEL: The mission of the non-profit in most Blue Cross Blue Shield plans was to provide affordable, accessible health care to people in the state. And now the mission is to make money for stockholders.
VARNEY: In a written statement, the National Association that controls the Blues trademark said all Blue Cross and Blue Shield companies are committed to providing affordable, quality health care. Still, some believe the only way to insure the Blues make good on that promise is to return them to their origins -sort of. Under the proposed health care bills, all insurance companies, for-profit and not-for-profit, would have to accept everyone and couldn't charge sicker people more, although that doesn't mean the Boy Scouts will be out canvassing for the Blues any time soon.
For NPR News, I'm Sarah Varney.
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