Blue Cross Blue Shield and Tax Reform

The Blue Cross and Blue Shield health insurance plans, which are exempt from Federal income tax under current law, would lose their t ax exemption under tha House-passed Tax Reform Act of 1985. The removal of t heir tax exemption would obligate them to pay a substantial amount of income tax in future years if their current financial status remains unchanged. Since most of their insurance business is in the form of group policies that are competitive in benefits and pricing with the policies offered by commercial insurers, however, their tax status is likely to have very little effect on most of their group subscribers. The increased costs due to taxability would have to come primarily from their individual (nongroup) policyholders or any other elements that now benefit from their tax-exempt status.

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