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B-164562 1 (1970-08-24)

handle is hein.gao/gaobabkqr0001 and id is 1 raw text is: ;;[' 'IOLL.ER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 .. . . . , , R, I E . 1., 1 P Sl B-164.562 6, LM899 AUG ?4 197C!, Dear Mr. Belcher: This report is in response to your request of June 26, 1970, for information concerning certain financial practices of the Blue Cross and Blue Shield organizations and their Washington, D.C., affiliate, Group Hospitalization, Inc. The Civil Service Commission entered into a contract with the Blue Cross Association and the National Association of Blue Shield Plans (hereafter referred to as the Corporations) to provide a Government-wide health benefits plan, called the Service Benefit Plan, to eligible Federal employees, annuitants, and their dependents or survivors in accordance with its responsibilities under the Federal Employees Health Benefits Act of 1959 (5 U.S.C. 8901). The contract, which was effective July 1, 1960, has been renewed annually. The cost of the Service Benefit Plan is shared by the participants and the Government. The Service Benefit Plan provides benefits generally through direct payments to doctors and hospitals. Under agreements with the Corporations, benefits provided by the Service Benefit Plan are under- written by certain Blue Cross and Blue Shield plans--called local plans--located throughout the country. The Corporations use the subscription income received from the Civil Service Commission primarily for reimbursing Blue Cross and Blue Shield local plans for benefits paid and for paying other allowable charges. The contract with the Civil Service Commission requires the Corporations to invest all funds on hand which, in the judgment of the Corporations, are in excess of those needed to discharge promptly the obligations incurred under the Service Benefit Plan. The Corporations contracted with Group Hospitalization, Inc., Washington, D.C., to serve as the Operations Center for the Service Benefit Plan. Group Hospitalization, Inc., is also the Blue Cross plan for the Washington, D.C., area. Subscription income is paid to the Operations Center, which reimburses local plans for paid claims, administrative expenses, and other allowable charges, and pays sub- scriber supplemental benefit claims for local plans that underwrite but do not process such claims. The Operations Center also maintains / /

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