Blue Cross: 501(m)

In the early 1980s, many commercial insurers began to challenge the fully tax-exempt status of the Blue Cross and Blue Shield plans. They brought their challenge to the IRS and to Congress. The national BCBS Association, a nonprofit organization that holds the BCBS trademark, went to great lengths to distinguish BCBS plans from commercial insurers by stressing their dedication to charitable, community-based health care services. As of January 1, 1987, the federal government removed the full tax-exempt status of BCBS plans and instead created a special tax class for BCBS organizations, Internal Revenue Code ("I.R.C.") 5833. The new I.R.C. category subjected BCBS plans to federal taxation but recognized the unique role BCBS plans play. Under I.R.C. 5833 the BCBS plans, unlike commercial for-profit insurers, are entitled to special tax benefits.

To learn more about the special BCBS tax designation, explore the documents below.

Blue Cross/ Blue Shield & Tax Reform (PDF)
Statement of Chairman Rostenkowski from the Congressional Record (PDF)
Affidavit of the author of A History of Blue Cross/ Blue Shield (PDF)