9.4 Blue Cross and Blue Shield Associations (BCBS)

Blue Cross and Blue Shield plans are commonly structured as prepaid health care plans. Under these arrangements, subscribers pay a fixed premium—typically on a monthly basis—in exchange for access to health care services at predetermined, negotiated rates. These negotiated fees are established through contractual agreements between the plan and participating health care providers.

Blue Cross primarily operates as a hospital service plan, maintaining contractual agreements with hospitals to provide covered hospital services to subscribers. Blue Shield, by contrast, functions as a physician service plan, contracting with physicians and other medical professionals to provide covered medical services.

In many states, Blue Cross and Blue Shield organizations are classified as not-for-profit entities and are regulated under special state legislation. Due to their nonprofit status and public service role, they may also receive certain tax considerations from the Internal Revenue Service (IRS).

Historically, Blue Cross and Blue Shield plans have emphasized the delivery of health care services rather than indemnity or reimbursement benefits. Instead of reimbursing subscribers after medical expenses are paid, the plans typically pay participating providers directly under contractual fee arrangements for the services rendered.