Abstract: Virtue and Vice? Non-Profit and For-Profit Healthcare Companies

Christy Ford Chapin

Abstract

The health care field hosts numerous nonprofit organizations, ranging from hospitals to insurance companies. This paper examines the history of nonprofit Blue Cross plans, which traditionally supplied subscribers with hospital insurance, and Blue Shield plans, which provided insurance for physician bills. Initially, during the 1930s and 1940s, nonprofit insurers behaved quite differently than commercial firms in their pursuit of the ''public interest.'' In exchange for their socially responsible behavior, states awarded nonprofit plans tax-exempt status and relief from numerous insurance regulations. Moreover, when federal policymakers passed Medicare in 1965 and created administrative positions for insurance companies, they granted Blue Cross and Blue Shield plans the vast majority of these lucrative intermediary positions. However, by the 1960s, nonprofit plans closely resembled and operated like their for-profit competitors. This analysis has current public policy implications for nonprofit insurance companies and hospitals.