Panel Seeks to End Blue Cross Tax Exemption

A task force of the House Ways and Means Committee agreed Thursday to strip Blue Cross and Blue Shield of its tax-exempt status, a move that officials of the health insurance plans said could result in higher premiums and less health coverage for millions of high-risk persons.

“Blue Cross-Blue Shield plans are often the only insurers that will take people who have something wrong with them,” said Mary Nell Lehnhard, vice president for government relations of the Blue Cross Blue Shield Assn. “That’s the group we’ll have to look at if we lose our tax exemption.”

The action by a six-member “working group” is scheduled to be voted on today by the full committee, which resumes work on revising the tax code after taking a week off. An amendment is expected to be offered to retain Blue Cross’ tax exemption.

The loss of the tax exemption--most other health-insurance providers are for-profit firms and are thus subject to taxation--would affect people with individual coverage more than those whose policies are obtained through employer-sponsored group arrangements.

There are 11 million people with individual coverage around the country. Altogether, 80 million Americans have Blue Cross and Blue Shield health coverage, according to the association.

Proponents of the change asked why Blue Cross and Blue Shield should have a tax advantage over its competitors.

“Less than 15% of its business provides coverage of poor risks and marginal individuals and groups,” said Rep. Fortney H. (Pete) Stark Jr. (D-Oakland), who chaired the group. “If they quack like a profit-making entity and waddle like a profit-making entity, they should be taxed like a profit-making entity.”