Blue Cross and Blue Shield

The more than 60 Blue Cross and Blue Shield organizations across the United States provide coverage to tens of millions of people. When considered in their totality, "the Blues," as they're commonly known, are the dominant health insurer in the nation. The individual Blue Cross and Blue Shield plans are loosely affiliated through the national Blue Cross & Blue Shield Association, but each organization is managed independently.

BC/BS, which is a type of service organization, differs from traditional commercial insurers in several important aspects. First, the Blues provide the majority of their benefits on a service basis instead of a reimbursement basis. This means that the insurer pays the provider directly for the medical treatment administered, rather than reimbursing the insured. Also, the Blues maintain contractual relationships with hospitals, doctors, and other health professionals. As participating providers, these hospitals and professionals contractually agree to specific costs for the medical services that they provide to BC/BS subscribers (the insured members). Thus, there's no contractual arrangement between the Blues and their subscribers, as there normally would be between insurer and insured.

Traditionally, Blue Cross has been known as a hospital service plan and Blue Shield a physicians' service plan, but these distinctions are by no means rigid. In most states Blue Cross and Blue Shield have merged, but each group still covers the expenses for which it was first developed: Blue Cross for hospital expenses and Blue Shield covering medical and surgical costs. However, in some states both plans serve as hospital and physician service plans. Under the hospital plan the contractual obligation is between Blue Cross and the hospital providing the care. Under the medical plan the contract is between Blue Shield and the physicians providing the services.

Subscribers in either BC/BS plan can transfer their membership from one Blues organization to another in other areas of the same town, other cities, or even other states. Subscribers may also change their particular coverage from individual to family, from family to group, or any combination of change that they may need to make. When transfers or changes are made, the coverage continues without interruption.

Blue Cross and Blue Shield are prepaid plans; in other words, the plan subscribers pay a set fee (typically monthly) for medical services covered under the plan. Blue Cross offers a broad range of coverages, including hospital daily room and board, outpatient services for minor surgery, medical emergencies, diagnostic testing, physical therapy, kidney dialysis, chemotherapy, and in some cases preadmission testing. Maternity benefits are available, and family plans may also include coverage for dependent handicapped children. Additionally, Blue Cross offers supplemental coverage for catastrophic loss, which is similar to commercial major medical plans. This supplement has comes with a deductible and an 80%/20% coinsurance feature.

Blue Shield provides prepaid medical coverage for physician and other health professional services. Again, through the contractual arrangement with the providers, the plan will generally pay the participating provider a predetermined amount for the specific service rendered. Normally, this amount will be based on the (or UCR) fees charged by other professionals in the same geographic area for the same or similar medical procedures. Dental coverage is available as well, again paying benefits on a service basis.

Lastly, Blue Cross and Blue Shield, as the rest of the healthcare industry, has built a strong managed care presence. Many subscribers can now choose coverage from Blues-affiliated HMO, PPO, or point-of-service (POS) plans.

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