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

SAL KHAN: I’m here
with Dr. Laurence Baker from Stanford
Medical School, who specializes in
health care policy. And I have just a
very basic question. We see these Blue Cross and
Blue Shield all of the time. And sometimes they’re
used together, sometimes they’re
used differently. And it just seems
confusing to me. What are these things, and how
are 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 Shield
began as separate things. Let’s see if I can
get this right. Blue Shield was
started by doctors who wanted to set
up a health care plan to help their
patients get coverage. SAL KHAN: Kind of a
preventative shield to help things from
getting to you. Right. Right. Right. DR. LAURENCE BAKER: Yes. So that was started
a long time ago. These both go back, Blue Cross
and Blue Shield, to the 1930s, really, they’re getting started. Blue Cross was started
by the hospitals, separately from Blue
Shield originally, and they got together
later as a way to help patients get
coverage for hospital care. SAL KHAN: And I guess the
cross because once you’re in the hospital, you might
get a little religious. DR. LAURENCE BAKER: Exactly. I mean, I’m not sure that’s what
they had in mind originally, but– SAL KHAN: And what
about the blue? DR. LAURENCE BAKER: I don’t
know where the blue comes from. SAL KHAN: Is that just a color
that makes people feel good, it’s like a health care color? DR. LAURENCE BAKER: I think it
must be a health care color. SAL KHAN: Red would
be 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 these
words used together. So these were separate plans. Doctors created
the Blue Shields. Hospitals created
the Blue Cross. DR. LAURENCE BAKER: And
then 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 things
happen along the way that starts to make things
confusing a little bit. One is that they’re operating
in every state, to some extent, independently. So, states regulate health
insurance in this country, or have a lot to
do with regulating health insurance
in this country. And so, every state
had its own laws. And as a result, the Blue
Cross and the Blue Shield plans in different states grew
up in different ways. So what you come down
to today is really different plans in
every state because of this history of development. As states develop
their laws differently, the plans would evolve
in the different states. SAL KHAN: I see. So this is just to give myself
a 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 having
to– some way for them to be paying a little bit
every month or every year, and that if something
were to happen, they could see the doctors. The hospitals kind of
had the same model. But they did it
differently in every state because the state
is the regulatory– DR. LAURENCE BAKER: The state
especially– well, in the ’30s, there weren’t a lot
of state regulations about health insurance. There wasn’t health insurance. SAL KHAN: Right. DR. LAURENCE BAKER:
But as states evolved, as the health care system
evolved, as the plans evolved, it grew separately in
slightly different directions in every state. So that led to the
formation really of, you see Blue Cross of Tennessee,
or Blue Shield of Florida, or Blue Cross Blue
Shield of Michigan. They’re all different, because
they’re all in their own state environment and they’ve
all grown up differently. SAL KHAN: So, normally–
these kind of are brands. We’ve all heard of
them in that way. But normally, a brand
means something. It means more quality,
or less quality, or some type of
spin on– you know, Apple means fun
consumer experience or something like that. But in this case, if I’m
hearing you correctly, if there’s Blue
Cross of California and Blue Cross of
Texas, they have nothing to do with each other, or very
little to do with each other? DR. LAURENCE BAKER: So they
all had their start kind of together in the
’30s, and then they’ve all grown in their own ways. But they’ve stayed
related, and some of them to greater extents than others. And so one of the things that
happened along the way was they formed an association. There’s now something in the
US called the Blue Cross Blue Shield Association,
which is a I guess an association of a lot of
the plans in different states that allows them to talk to each
other, to try to work together. SAL KHAN: And this
is an umbrella for all of the Blue Cross
and all of the Blue Shields. So that’s why we hear them
used so frequently together. People say Blue
Cross Blue Shield. DR. LAURENCE BAKER: Yeah. So there’s two reasons
you hear that together. One is the
association that tries to work with plans
from both groups. The other is that,
in some states, over time, the two got
together and actually became one health insurance plan. So there are states where
the health insurance plan is Blue Cross and
Blue Shield of a state. And there are other states
where they stayed separate. So, we’re here in California,
where Blue Shield and Blue Cross have historically
stayed as separate plans. But there are some states
where they’re the same thing. And then you’d hear Blue
Cross and Blue Shield. SAL KHAN: So if someone tells
you Blue Cross of state x, that just means to you
health insurance plan. There’s nothing else that you
can really take from that. DR. LAURENCE BAKER:
So, once upon a time, you may have been able
to take more from it. But these days, it’s
possible for them to vary in quite a
few different ways. Some of the Blue Cross
and Blue Shield plans, especially the Blue Cross plans,
have become for-profit plans. So, historically these
were always nonprofit. But in the last– SAL KHAN: So Blue Cross
especially, some of them have gone for-profit. DR. LAURENCE BAKER: Yes. I think, in both
cases, but Blue Cross is the one that I pay
more attention to. SAL KHAN: Right. DR. LAURENCE BAKER:
So they may be for-profit or
not-for-profit plans. They may act in similar ways. And they do, because at least
the ones in the association, tend to act with some
similarity from place to place. SAL KHAN: And just
to– because I’ve explained this all
the time about even– Khan Academy is
a not-for-profit. A not-for-profit is an
entity, it can, in theory, charge revenue– Khan Academy
doesn’t– but it could charge revenue. But there’s no owner
of the organization who can become rich off of it. It’s owned by the public. While a for-profit
has shareholders, and it can be bought
and sold, and it can issue dividends,
and all the rest. DR. LAURENCE BAKER: Yeah. So, historically in
America, most health plans were not-for-profit entities. They couldn’t take
money that they earned and give it out to people
who 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 Shield
in some states, they were treated as
quasi-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 this
history, especially with Blue Cross and Blue
Shield, of very not-for-profit, public-spirited entities. When you get to for-profit
plans, which we really didn’t have in the
US in a big way until maybe the
last decade or two, where we’ve seen
some conversions. These are situations where
the plan can act explicitly as a profit generator for its
shareholders, for its owners. SAL KHAN: And some are
now publicly traded and they’re on the
stock exchange. DR. LAURENCE BAKER: They may
be publicly traded, yeah. SAL KHAN: And so when
we talk about some of them becoming
for-profit here, it’s that literally–
I don’t know, the license to use the name
either Blue Cross or Blue Shield, or maybe
some of the assets of the former not-for-profit
are somehow transferred, or I guess a
for-profit buys them. DR. LAURENCE BAKER: So we
had a series of these things. We call them conversions. And when the company converted
from being a not-for-profit to a for-profit,
there were a lot of states in which
those conversions, or situations in which
they happened, where the public, the
government, somebody compelled the for-profit
entity in the conversion to create a public good. So there are some
foundations that now exist– SAL KHAN: Oh, I see. DR. LAURENCE BAKER:
In the conversion, they allowed a transfer of a
not-for-profit to a for-profit, but you had to create something
valuable for the public. So some of the things
that we see now in states, some of
the big foundations that exist in health care,
are conversion foundations around the for-profit
conversions 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 Blue
Cross and Blue Shield– but I believe Anthem has a
kind of a– Let me see here, Anthem was a Blue– DR. LAURENCE BAKER: Blue
Cross in California. So, Anthem is a company
that is a large company that has Blue Cross, I think mostly
Blue Cross or all Blue Cross affiliates or entities
in different states. I think there are
14 or 15 of them. SAL KHAN: So these are
for-profit Blue Crosses if they have Anthem with them. DR. LAURENCE BAKER: I
believe that’s correct. SAL KHAN: Right. Right. Right. And is there any, I guess
in how they operate, from a consumer point
of view, any difference between a for-profit Blue
Cross or Blue Shield, or is there anything
that we can tell? DR. LAURENCE BAKER:
So, that’s actually a really interesting question. There are people
who’ve gone to look, and they’ve tried
to sometimes find some evidence for differences. There are a few
studies out there where people can find
some differences. But there’s not
a lot of evidence that they behave
really differently. At the end of the day,
they have to compete in the same marketplace for the
business of the same companies and the same people. And if they behaved really
obviously different, if one was obviously way
better than the other, the market would sort out
who’s going to win this. And the market has allowed
both types to exist. So, there are certainly
differences in the written charters, and maybe
differences in the preferences in the stated
ideals of the people who run these organizations. And that might make a
difference in some cases. But it’s hard when you
get it all together, and you really go try to do
national data or something to find a big
difference between them. SAL KHAN: So the
big picture here is, as much as I’ve
looked at health care plans even when were trying
to figure out for employees at Khan Academy, which
health care plan to choose and which not. And I’ve stared, oh,
what’s the difference between Blue Cross
and Blue Shield? There’s actually very
little I can tell just by looking at those brands. I would really
have to dig deeper into the actual
health care policy. And that’s going to be
different from state to state, and some will be for-profit,
some will be not-profit. Even that’s not enough to tell
you a general rule of thumb. You really just have to look
at the health care plans. DR. LAURENCE BAKER: You have to
look at the health care plans. And it’s Blue Cross
and Blue Shield. But there’s other
plans out there. There’s Kaiser around here. There’s Aetna, and
Cigna, and other plans. And they can vary
from state to state. And even within, you
can see variations. So, Blue Cross in California,
Blue Shield in California, might offer some different
types of choices. So, if you said, I’ve
got a really nice plan from Blue Cross. And I look at another state, and
you look at a Blue Cross plan, it might be that you’re just
looking at a less generous one, where there is another
one that you can look at. So, you even have to look within
a company at the specifics. SAL KHAN: Definitely when
we go from state to state, it would be weird to have
brand loyalty to some of these. DR. LAURENCE BAKER: It would. Yeah. You know Blue
Cross Blue Shield– SAL KHAN: Because they’re not
going to be the same thing. DR. LAURENCE BAKER:
They have this history of being public-spirited
entities, and some of that persists to this day. So maybe that’s
something to think about. But in a general sense,
there are so many things that they could
vary on that you’d want to be very careful
with any choice you make. And know that it could really
vary across state lines. SAL KHAN: Interesting.

24 Replies to “Blue Cross and Blue Shield | Health care system | Heatlh & Medicine | Khan Academy”

  1. Health care that is for-profit driven is just insane in my opinion.

    Rght now, anthem blue cross is trying to NOT pay for my bills… gives me headache just thinking about it.

    thanks for the history of blue cross and blue shield, khan!

  2. my parents have Blue Cross Blue Shield. Within their first month, their premium was raised…look elsewhere if possible.

  3. 6 years ago, a company I owned with a partner was changing insurance companies. We went to BCBC of Arkansas. We had only 10 employees. The process was begun; the old group plan dropped. Everything was fine….until we realized they were not insuring my partner in the group plan, because he had had a heart attack. Legally, they couldn't do this with a group plan, but they did, arrogantly, almost daring us to do a thing about it. They are sorry, but then, all insurance companies are sorry.

  4. At a previous employer located in Iowa, I had BCBS of Illinois because the corporate office was in Illinois. It was excellent insurance, best I ever had, but it was also very expensive, especially if you chose the option for the smaller co-pay. Eventually, it got so pricey that the employer changed to a different insurance carrier which was not as good quality-wise, but much more affordable for the company and for the employees.

  5. Wasn't the Blue Zones Project sponsored by Blue Cross Blue Shield? How does that work if they are different from state to state?

  6. The owner embezzled his own corporation in 1929 now it's great depression #3 Says my son Robby hit December 2015 it takes 3 years to arrange your retired packages wives no longer get covered or their children by the time they retire age 63 .the healthcare system is all screwed up🔩

  7. I got BCBS also and they say treatments are not medically necessary. They won't pay. Horrible insurance, a complete and utter disaster. Yes, profit for them and you die.

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