Blue Cross and Blue Shield

History

The original Blue Cross company was an outgrowth of the Baylor Plan, a nonprofit health insurance plan established in Houston, Texas, in 1929 by Francis Ford Kimball to provide coverage for teachers through a prepayment plan of 50 cents a month. The Houston plan was the forerunner of the Blue Cross plans that provided hospital services. The Blue Cross name and symbol were created in 1934 by E. A. van Steenwyk from St. Paul, Minnesota's group health plan. Blue Cross's former Chicago headquarters was housed in the American Hospital Association (AHA) building.

Blue Cross plans later developed in New York, New Jersey, and California. By 1935, there were 15 plans in 11 states. The number of Blue Cross plans had grown from 56 to 80 between 1940 and 1945, and enrollment increased from 6 million to 19 million.

During this period, a comparable plan to cover physician services was also established in the states of Washington and California. From these physician plans, the medical societies around the nation began to develop prepaid insurance programs that covered physician services. In 1946, a number of plans banded into a national group called the Associated Medical Care Plans, overseen by the American Medical Association (AMA), and informally adopted the Blue Shield as its symbol. This organization eventually became the Blue Shield Association (BSA). The Blue Shield plans that provided physician services had an early enrollment of 3 million. In the 1960s, there were 148 Blue Cross and Blue Shield plans in the United States; some providing hospital insurance under the Blue Cross plans and others providing physician coverage under the Blue Shield plans.

In 1961, Walter J. McNerney (1925–2005), who was recruited by the Michigan Blue Cross plan from the University of Michigan to examine the hospital and medical care costs and insurance coverage in that state, became the president of the Blue Cross Association. The McNerney era was marked by numerous changes in the nation's healthcare system, including the development of the federal Medicare and Medicaid programs in 1965, utilization and case management initiatives, the collaboration of plans to offer national products, preadmission testing programs, and HMO sponsorship. McNerney was instrumental in moving the Blue Cross plans away from the control of the AHA, an early sponsor of the hospital insurance concept, and the AMA, which managed the BSA. In 1972, the Blue Cross and Blue Shield companies formally separated from the AHA, which ushered in the tensions between the organizations.

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