Blue Cross and Blue Shield | Health care system | Heatlh & Medicine | Khan Academy

SAL KHAN: I'm herewith Dr. Laurence Baker from StanfordMedical School, who specializes inhealth care policy. And I have just avery basic question. We see these Blue Cross andBlue Shield all of the time. And sometimes they'reused together, sometimes they'reused differently. And it just seemsconfusing to me. What are these things, and howare they related to each other?.

DR. LAURENCE BAKER:So they're related in some really interesting ways. They go way back in time. So Blue Cross and Blue Shieldbegan as separate things. Let's see if I canget this right. Blue Shield wasstarted by doctors who wanted to setup a health care plan to help theirpatients get coverage. SAL KHAN: Kind of apreventative shield.

To help things fromgetting to you. Right. Right. Right. DR. LAURENCE BAKER: Yes. So that was starteda long time ago. These both go back, Blue Crossand Blue Shield, to the 1930s, really, they're getting started. Blue Cross was startedby the hospitals,.

Separately from BlueShield originally, and they got togetherlater as a way to help patients getcoverage for hospital care. SAL KHAN: And I guess thecross because once you're in the hospital, you mightget a little religious. DR. LAURENCE BAKER: Exactly. I mean, I'm not sure that's whatthey had in mind originally, but– SAL KHAN: And whatabout the blue?.

DR. LAURENCE BAKER: I don'tknow where the blue comes from. SAL KHAN: Is that just a colorthat makes people feel good, it's like a health care color? DR. LAURENCE BAKER: I think itmust be a health care color. SAL KHAN: Red wouldbe inappropriate. DR. LAURENCE BAKER:Let's go with blue. You're not bleeding with blue. SAL KHAN: Blue is–you look at the sky. OK.

And so what happened? So, I do see thesewords used together. So these were separate plans. Doctors createdthe Blue Shields. Hospitals createdthe Blue Cross. DR. LAURENCE BAKER: Andthen they grew over time and changed. So they got started in the '30s. They were around through the'40s and the '50s, '60s, '70s,.

And so a couple thingshappen along the way that starts to make thingsconfusing a little bit. One is that they're operatingin every state, to some extent, independently. So, states regulate healthinsurance in this country, or have a lot todo with regulating health insurancein this country. And so, every statehad its own laws. And as a result, the BlueCross and the Blue Shield plans.

In different states grewup in different ways. So what you come downto today is really different plans inevery state because of this history of development. As states developtheir laws differently, the plans would evolvein the different states. SAL KHAN: I see. So this is just to give myselfa kind of a framework of what's happening, is that pre-1920s,early 1930s, there really.

Weren't health care plans. DR. LAURENCE BAKER:Not to speak of. SAL KHAN: The physicians said,hey, we want a way for people to see us without havingto– some way for them to be paying a little bitevery month or every year, and that if somethingwere to happen, they could see the doctors. The hospitals kind ofhad the same model. But they did itdifferently in every state.

Because the stateis the regulatory– DR. LAURENCE BAKER: The stateespecially– well, in the '30s, there weren't a lotof state regulations about health insurance. There wasn't health insurance. SAL KHAN: Right. DR. LAURENCE BAKER:But as states evolved, as the health care systemevolved, as the plans evolved, it grew separately inslightly different directions.

In every state. So that led to theformation really of, you see Blue Cross of Tennessee,or Blue Shield of Florida, or Blue Cross BlueShield of Michigan. They're all different, becausethey're all in their own state environment and they'veall grown up differently. SAL KHAN: So, normally–these kind of are brands. We've all heard ofthem in that way. But normally, a brandmeans something.

It means more quality,or less quality, or some type ofspin on– you know, Apple means funconsumer experience or something like that. But in this case, if I'mhearing you correctly, if there's BlueCross of California and Blue Cross ofTexas, they have nothing to do with each other, or verylittle to do with each other? DR. LAURENCE BAKER: So theyall had their start kind.

Of together in the'30s, and then they've all grown in their own ways. But they've stayedrelated, and some of them to greater extents than others. And so one of the things thathappened along the way was they formed an association. There's now something in theUS called the Blue Cross Blue Shield Association,which is a I guess an association of a lot ofthe plans in different states.

That allows them to talk to eachother, to try to work together. SAL KHAN: And thisis an umbrella for all of the Blue Crossand all of the Blue Shields. So that's why we hear themused so frequently together. People say BlueCross Blue Shield. DR. LAURENCE BAKER: Yeah. So there's two reasonsyou hear that together. One is theassociation that tries to work with plansfrom both groups.

The other is that,in some states, over time, the two gottogether and actually became one health insurance plan. So there are states wherethe health insurance plan is Blue Cross andBlue Shield of a state. And there are other stateswhere they stayed separate. So, we're here in California,where Blue Shield and Blue Cross have historicallystayed as separate plans. But there are some stateswhere they're the same thing.

And then you'd hear BlueCross and Blue Shield. SAL KHAN: So if someone tellsyou Blue Cross of state x, that just means to youhealth insurance plan. There's nothing else that youcan really take from that. DR. LAURENCE BAKER:So, once upon a time, you may have been ableto take more from it. But these days, it'spossible for them to vary in quite afew different ways. Some of the Blue Crossand Blue Shield plans,.

Especially the Blue Cross plans,have become for-profit plans. So, historically thesewere always nonprofit. But in the last– SAL KHAN: So Blue Crossespecially, some of them have gone for-profit. DR. LAURENCE BAKER: Yes. I think, in bothcases, but Blue Cross is the one that I paymore attention to. SAL KHAN: Right.

DR. LAURENCE BAKER:So they may be for-profit ornot-for-profit plans. They may act in similar ways. And they do, because at leastthe ones in the association, tend to act with somesimilarity from place to place. SAL KHAN: And justto– because I've explained this allthe time about even– Khan Academy isa not-for-profit. A not-for-profit is anentity, it can, in theory,.

Charge revenue– Khan Academydoesn't– but it could charge revenue. But there's no ownerof the organization who can become rich off of it. It's owned by the public. While a for-profithas shareholders, and it can be boughtand sold, and it can issue dividends,and all the rest. DR. LAURENCE BAKER: Yeah.

So, historically inAmerica, most health plans were not-for-profit entities. They couldn't takemoney that they earned and give it out to peoplewho might be the owners. They'd have to be reinvested. SAL KHAN: Exactly. DR. LAURENCE BAKER: In fact,even in the early days of Blue Cross and Blue Shieldin some states, they were treated asquasi-public entities.

SAL KHAN: Right. Right. Right. DR. LAURENCE BAKER:And they've kind of grown away from that a bit more. But there's thishistory, especially with Blue Cross and BlueShield, of very not-for-profit, public-spirited entities. When you get to for-profitplans, which we really.

Didn't have in theUS in a big way until maybe thelast decade or two, where we've seensome conversions. These are situations wherethe plan can act explicitly as a profit generator for itsshareholders, for its owners. SAL KHAN: And some arenow publicly traded and they're on thestock exchange. DR. LAURENCE BAKER: They maybe publicly traded, yeah. SAL KHAN: And so whenwe talk about some.

Of them becomingfor-profit here, it's that literally–I don't know, the license to use the nameeither Blue Cross or Blue Shield, or maybesome of the assets of the former not-for-profitare somehow transferred, or I guess afor-profit buys them. DR. LAURENCE BAKER: So wehad a series of these things. We call them conversions. And when the company convertedfrom being a not-for-profit.

To a for-profit,there were a lot of states in whichthose conversions, or situations in whichthey happened, where the public, thegovernment, somebody compelled the for-profitentity in the conversion to create a public good. So there are somefoundations that now exist– SAL KHAN: Oh, I see. DR. LAURENCE BAKER:In the conversion,.

They allowed a transfer of anot-for-profit to a for-profit, but you had to create somethingvaluable for the public. So some of the thingsthat we see now in states, some ofthe big foundations that exist in health care,are conversion foundations around the for-profitconversions of Blue Cross and Blue Shield. SAL KHAN: I see. But when we see things like–I think it's, I always get.

Confused between BlueCross and Blue Shield– but I believe Anthem has akind of a– Let me see here, Anthem was a Blue– DR. LAURENCE BAKER: BlueCross in California. So, Anthem is a companythat is a large company that has Blue Cross, I think mostlyBlue Cross or all Blue Cross affiliates or entitiesin different states. I think there are14 or 15 of them. SAL KHAN: So these arefor-profit Blue Crosses.

If they have Anthem with them. DR. LAURENCE BAKER: Ibelieve that's correct. SAL KHAN: Right. Right. Right. And is there any, I guessin how they operate, from a consumer pointof view, any difference between a for-profit BlueCross or Blue Shield, or is there anythingthat we can tell?.

DR. LAURENCE BAKER:So, that's actually a really interesting question. There are peoplewho've gone to look, and they've triedto sometimes find some evidence for differences. There are a fewstudies out there where people can findsome differences. But there's nota lot of evidence that they behavereally differently.

At the end of the day,they have to compete in the same marketplace for thebusiness of the same companies and the same people. And if they behaved reallyobviously different, if one was obviously waybetter than the other, the market would sort outwho's going to win this. And the market has allowedboth types to exist. So, there are certainlydifferences in the written charters, and maybedifferences in the preferences.

In the statedideals of the people who run these organizations. And that might make adifference in some cases. But it's hard when youget it all together, and you really go try to donational data or something to find a bigdifference between them. SAL KHAN: So thebig picture here is, as much as I'velooked at health care plans even when were tryingto figure out for employees.

At Khan Academy, whichhealth care plan to choose and which not. And I've stared, oh,what's the difference between Blue Crossand Blue Shield? There's actually verylittle I can tell just by looking at those brands. I would reallyhave to dig deeper into the actualhealth care policy. And that's going to bedifferent from state to state,.

And some will be for-profit,some will be not-profit. Even that's not enough to tellyou a general rule of thumb. You really just have to lookat the health care plans. DR. LAURENCE BAKER: You have tolook at the health care plans. And it's Blue Crossand Blue Shield. But there's otherplans out there. There's Kaiser around here. There's Aetna, andCigna, and other plans. And they can varyfrom state to state.

And even within, youcan see variations. So, Blue Cross in California,Blue Shield in California, might offer some differenttypes of choices. So, if you said, I'vegot a really nice plan from Blue Cross. And I look at another state, andyou look at a Blue Cross plan, it might be that you're justlooking at a less generous one, where there is anotherone that you can look at. So, you even have to look withina company at the specifics.

SAL KHAN: Definitely whenwe go from state to state, it would be weird to havebrand loyalty to some of these. DR. LAURENCE BAKER: It would. Yeah. You know BlueCross Blue Shield– SAL KHAN: Because they're notgoing to be the same thing. DR. LAURENCE BAKER:They have this history of being public-spiritedentities, and some of that persists to this day.

So maybe that'ssomething to think about. But in a general sense,there are so many things that they couldvary on that you'd want to be very carefulwith any choice you make. And know that it could reallyvary across state lines. SAL KHAN: Interesting.
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