"The “Blues” had been ruled tax-exempt by Internal Revenue regulations since their inception in the 1930s, apparently because they were regarded as community service organizations. The Tax Reform Act of 1986 removed BlueCross BlueShield plans’ tax exemption because Congress believed that “exempt charitable and social welfare organizations that engage in insurance activities are engaged in an activity whose nature and scope is inherently commercial rather than charitable,” and that “the tax-exempt status of organizations engaged in insurance activities provided an unfair competitive advantage.”

The 1986 Act, however, introduced the special deduction described above, in part because of their continuing, albeit more limited, role in providing community-rated health insurance. In particular, Section 833(c)2(c) links the special deduction for BlueCross BlueShield plans to the provision of high-risk and small-group coverage."

Source: http://subsidyscope.org/nonprofits/tax-expenditures/blue-cross-blue-shield/

Long story short: You cannot claim to be a not-for-profit charitable foundation and be an insurance company at the same time. The term "insurance" implies that the insurer will only devote a fraction of the money to providing true health care. While BCBS started off with good intentions and a very good idea, BCBS has turned into just another health insurance company paying millions in bonuses to CEOs, denying essential health care to applicants and customers while raising health fees by 50% in many states.

We don't need "health plans" or "health insurance". The people of the United States need true health care. Not a system that moves towards fee-for-service and discourages high quality health care, but a system that establishes integrated, comprehensive health care bringing together inputs, delivery, management and organization of services related to diagnosis, treatment, care, rehabilitation and health promotion. The first step in doing so is to make sure that health insurers spend at least 95% of all revenues on true health care, not the 80-85% proposed by the federal health care bill. The ultimate goal is getting rid off the middlemen and putting health care into the hands of health care providers, such as doctors and hospitals, who treat us as patients and not customers or numbers in accounting.