Health Insurance:

Comparing Blue Cross and Blue Shield Plans With Commercial Insurers

HRD-86-110: Published: Jul 11, 1986. Publicly Released: Jul 11, 1986.

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In response to a congressional request, GAO compared the Blue Cross and Blue Shield Association health plans' coverage availability for high-risk persons with that of for-profit insurance plans to determine if the Blue Cross/Blue Shield plans' tax-exempt status is warranted.

GAO found that: (1) for 67 percent of the Blue Cross/Blue Shield plans' high-risk cases, there was at least one commercial health plan alternative, but all of the commercial insurers rejected the remaining cases; (2) the commercial insurers and three of the six Blue Cross/Blue Shield plans offered high-risk individuals less comprehensive coverage than other individuals; (3) both Blue Cross/Blue Shield and the commercial insurers experience-rate their large group coverage, which constitutes the majority of their business; (4) the Blue Cross/Blue Shield pricing methods for high-risk individuals resemble those commercial insurers use; (5) Blue Cross/Blue Shield plans operate for-profit businesses on which they pay taxes; and (6) the Blue Cross/Blue Shield plans varied significantly among themselves in underwriting practices. GAO also found that taxing the Blue Cross/Blue Shield plans: (1) should not affect those who are members of large, employer-paid groups; and (2) could adversely affect the individual and small-group markets, particularly those considered to be high-risk, because commercial firms would not underwrite them. GAO was unable to determine the overall effect that changes in the tax-exempt status would have on the availability and affordability of health insurance to high-risk individuals and groups because of a lack of data.

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