Singing the blues

Once again, Blue Cross and Blue Shield Association is requesting exemption from the government cost accounting standards that are applied primarily to Defense Department contractors. Congress should grant the exemption.

Members of Congress have exempted Blue Cross/Blue Shield and other Federal Employees Health Benefits (FEHB) program participants from cost accounting standards for two years, and Blue Cross/Blue Shield is asking them to do it again.

The American Federation of Government Employees and the Office of Management and Budget both oppose issuing the exemption. They argue that if these accounting standards are applied, Blue Cross/Blue Shield will be forced to lower its premiums. But in my opinion, forcing Blue Cross/Blue Shield to adopt the standards is a big mistake.

Blue Cross/Blue Shield officials said that the FEHB program accounts for only about 5 percent of the typical Blue Cross/Blue Shield plan's business. But because federal enrollees use the same benefits and provider networks as its private-sector subscribers, feds and the government reap the deep discounts that Blue Cross/Blue Shield plans collectively are able to negotiate on behalf of more than 75 million people. But Blue Cross/Blue Shield does not want to set up a separate accounting system for feds. Can you blame them?

Because discounts and provider agreements are not separately negotiated by individual plans for FEHB participants, and because operational systems are not segregated as such, it doesn't make sense for Blue Cross/Blue Shield to redo its accounting system simply to install cost accounting standards. Applying these standards does not add value to the FEHB program, but could degrade the commercial capabilities on which Blue Cross/Blue Shield's core business depends.

For these reasons, officials from Blue Cross/Blue Shield refuse to sign any contract with the Office of Personnel Management that seeks to implement the standards currently exempted by law.

Let's not overlook that Blue Cross/Blue Shield cannot be forced to participate in the FEHB program. If government accounting requirements become too onerous, it can simply drop out of the program, much like Aetna Inc. did with its governmentwide fee-for-service plan. After all, if the FEHB program accounts for only 5 percent of Blue Cross/Blue Shield's business, then there's not a strong incentive to stay in the program.

But we would be better off if they did stay in the program. It's the largest plan, and one in every two feds uses it. And then there's the convenience of wide acceptability. I doubt that there's a hospital nationwide that doesn't accept Blue Cross/Blue Shield. If the association is pulling a fast one, then why do the other fee-for-service plans charge more? I'm not a fan of Blue Cross/Blue Shield, but I think the marketplace should settle this dispute — not the government.

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at [email protected]


  • Defense
    Soldiers from the Old Guard test the second iteration of the Integrated Visual Augmentation System (IVAS) capability set during an exercise at Fort Belvoir, VA in Fall 2019. Photo by Courtney Bacon

    IVAS and the future of defense acquisition

    The Army’s Integrated Visual Augmentation System has been in the works for years, but the potentially multibillion deal could mark a paradigm shift in how the Defense Department buys and leverages technology.

  • Cybersecurity
    Deputy Secretary of Homeland Security Alejandro Mayorkas  (U.S. Coast Guard photo by Petty Officer 3rd Class Lora Ratliff)

    Mayorkas announces cyber 'sprints' on ransomware, ICS, workforce

    The Homeland Security secretary announced a series of focused efforts to address issues around ransomware, critical infrastructure and the agency's workforce that will all be launched in the coming weeks.

Stay Connected