Blue Cross was never, properly understood, a health insurance program. It was originally a network of hospitals that agreed to provide services to subscribers who paid a flat monthly fee–with no assessment of risk–for services at the hospital. Technically, Blue Cross was called a health care contractor or health care service contractor (and, in many states, it still is). Hospital health care service contracts were pretty common in the years before the war–as were other kinds of service contracts (shoe repair, farm equipment repair, etc.) Pay a flat monthly fee, get the service. The Blue Cross association revolutionized this by making hospital services available on a region-wide or nationwide basis by creating a hospital network that allowed an increasingly mobile post-war population access to hospital services outside their community.
The hospital service contracts weren’t like a making a bet at all: there was no underwriting, monthly charges were relatively uniform, and access to hospital services was generally uniform. But it was too much of a good thing, and there was no real way to control subscribers’ overutilization of hospital services–which, in turn, dramatically increased costs. So, over time, the hospital service contracts offered by Blue Cross franchisees tended to resemble more traditional “health insurance” products, with risk-assessment, underwriting, co-pays, and the like.
