BLUE CROSS-BLUE SHIELD ADMINISTRATION COSTS: A STUDY OF NON-PROFIT HEALTH INSURERS

Abstract

The administrative costs of Blue Cross and Blue Shield are examined in this paper. The main finding is that the Blues appear to enjoy substantial managerial slack. This striking conclusion is based upon some rather circumstantial evidence. First, no economies of scale are found which is not true of the commercial insurers. Second, the variance in costs is much smaller for those costs associated with Medicare administration than for the Blues own business. Finally, despite the cost advantages of the merged organizational form, this is not the more prevalent form.