Moments in Memory: BlueCross BlueShield founding shaped future of city's health care

The front page of the Aug. 16, 1995, edition of the Chattanooga Free Press reported on the merger of Tennessee's two BlueCross BlueShield companies, in Chattanooga and Memphis, forming a $1 billion company to be based in Chattanooga.

Germ also knew McDonald the founder of BlueCross BlueShield of Tennessee. He served on the BlueCross board under McDonald's chairmanship in the 1990s. Germ mourned the loss of McDonald when he died on June 19, 1990.

Which of the two - respected newspaper publisher or founder of BlueCross - will be McDonald's legacy when the history of Chattanooga is reviewed 50 years from now?

"That's hard," said Germ, "but I have to think it will be creating a statewide health plan."

McDonald founded the Free Press in 1933. For the next 57 years, he battled the Chattanooga Times, later under Publisher Ruth Holmberg, for subscriptions and advocated on issues from a conservative ideology that was the opposite of Holmberg's liberal views. Both became instrumental civic leaders and left their imprints on the organizations each supported.

"The thing about Ruth and Mr. Roy was that they were fierce competitors, but what motivated each of them was what was best for the community," Germ said. "Both were forward thinkers on behalf of the community, always looking to the future."

BlueCross was founded in 1945 when McDonald saw the need to establish a payment system that would benefit Erlanger Hospital, now the Erlanger Health System. McDonald was chairman of the Erlanger board when the Tennessee State Hospital Association was formed on Sept. 13, 1945, which was the birth of BlueCross. He would serve on the Erlanger board for more than 20 years.

McDonald would be the organization's first president, serving in that role until 1959, and he would be chairman of the BlueCross board for the next 45 years until his death.

"I remember the first meeting after Mr. Roy died," said Germ. "It was like, 'Why isn't Mr. Roy here?' It was just a hollow feeling."

Germ said McDonald knew every detail of the BlueCross operations just like he knew where every piece of paper was among the thousands of pieces of paper that adorned his office on East 11th Street for more than two decades.

"He knew every nut and bolt about BlueCross," Germ said. "He always wanted to know how to hold the cost of premiums down. He was never motivated by profit, but only about helping people pay their bills and getting hospitals paid. BlueCross was his baby."

It was a single-column story on the front page of the Chattanooga News-Free Press (5 cents, 24 pages) on Sept. 13, 1945. "HOSPITAL PLAN TO BE PUSHED IN TENNESSEE" signaled the beginning of what is now BlueCross BlueShield of Tennessee.

There were 25 stories on the front page. The banner headline called for the Japanese to publish facts on their war crimes, 11 days after the nation's surrender in World War II. To the right of the story reporting the formation of the insurance plan, legendary News-Free Press reporter J.B. Collins had a unique story.

"Divine Starts [racial slur referring to Japanese] Hunting At 40, Kills 27, Nabs Six"

The secondary headline said: "City Soldier Began Adventures with Leap From Walnut Street Bridge 20 Years Ago."

The lead paragraph said: "Chattanooga's T5 Edward McCallie Divine, who as an adventure-seeking youth of 22 startled the city by diving off the top of the lofty Walnut Street Bridge 20 years ago just to prove that Friday the 13th wasn't unlucky, is coming home reluctantly after one of the most epic Jap-hunting sparred on Pacific records."

The secondary headline on the new insurance plan said, "Association Formed to Offer 'Prepaid' Expense Contracts." The report said, "Plans for a state-wide non-profit, prepaid hospitalization plan took definite shape yesterday at a meeting in Nashville of the incorporators of the Tennessee Hospital Service Association, which hopes to offer prepaid hospital service contracts, similar to those now written here by Erlanger Hospital Service Plan, by Oct. 1."

Chattanoogan T. Allen Lupton was named chairman of the board, while McDonald was secretary.

McDonald was named president of the new plan.

The new organization's plan of "prepaid hospitalization at a low cost" was modeled after one used at Erlanger and would now be offered to hospitals statewide. Subscribers would pay premiums; the new insurance company would pay claims based on contracts with the hospitals.

Erlanger and Children's hospitals were in the association from the first day, and the report says, "other Chattanooga hospitals will be invited to become members."

All Nashville hospitals, including Vanderbilt, were charter providers in the plan. Offices would be opened in Nashville and Chattanooga, "with the main office in this city," the report said. The directors moved quickly, the newspaper reported, setting Oct. 1 as the day when citizens could subscribe to the plan.

The insurance plan would begin to be called BlueCross BlueShield in 1949. It began administering Medicare in 1965, the year it was created. Its name would become BlueCross BlueShield of Tennessee in 1969. A year later, the company would move into the "Gold Building" in downtown Chattanooga in 1970, a building the Times Free Press called one of Chattanooga's "landmark" buildings.

"The gold building was all Mr. Roy," Germ said. "It was what BlueCross needed, but he also knew it would be good for Chattanooga."

Germ said a pivotal moment for the BlueCross board came in the late 1980s when it began discussing the future of BlueCross BlueShield of Memphis, a smaller BCBS company. The fear in the boardroom was that it would grow and be purchased by another insurance provider from Arkansas or Mississippi.

McDonald, Germ said, led the discussions of a future acquisition of the Memphis company.

"Mr. Roy wanted a statewide organization based in Chattanooga," said Germ. "He didn't want another insurance company in Memphis owned by someone in Arkansas."

"2 BLUECROSS COMPANIES TO MERGE" the Aug. 16, 1995, Chattanooga News-Free Press (50 cents) announced on the afternoon of Aug. 16, 1995, five years after McDonald's death. Just as in 1945, the newspaper of McDonald emphasized the location of BlueCross with a second headline saying, "Memphis System Joining Plan Headquartered Here."

"BlueCross was not a company that was ever going to end up being headquartered in Nashville," said Germ. "Mr. Roy wouldn't have that."

The lead story by Business Editor John Vass Jr. announced the merger of the two entities "into a single $1 billion organization with the home office in Chattanooga." His third paragraph offered the insight needed to realize the merger was more about a bigger company buying a smaller one.

"The combined organization will have assets of more than $1 billion. The Chattanooga company accounts for about $900 million of the combined total," the report said.

The Chattanooga Times (50 cents), which was destined to rarely get a news break on a story related to BlueCross, followed the next morning with a full story on the front of its Metro section. Free Press Editor Lee Anderson reinforced the issue of location the next day in a short editorial.

"We welcome the combination, that appropriately will be headquartered in Chattanooga."

The growth of BlueCross continued through the 2000s and the insurance company announced its move from the "Gold Building" to a $299 million headquarters on Cameron Hill on June 23, 2006.

"BlueCross aims to connect new complex to downtown" the newspaper reported on its business page. Business writer Mike Pare's lead paragraph said the "new headquarters will not create an isolated fortress on Cameron Hill." A glimpse of what was to come came with an editor's note that offered a "podcast of Roger Staubach and officials from BlueCross and BlueShield of Tennessee talk about the new corporate campus, go to"

"Chattanooga's 'Acropolis' headlined a column from Anderson on the Free Press editorial page.

Anderson captured the history of the insurance company, noting that Erlanger Board Chairman McDonald acted out of more than just concern for Erlanger, a hospital "constantly underfunded by Chattanooga and Hamilton County budget-makers."

"So, Mr. McDonald instituted BlueCross insurance here to help Chattanoogans get needed health care, to help them pay their hospital bills and to assure Erlanger would get the financial support to make it an exceptional medical care facility."

Germ looks back at the formation of BCBST, smiles and shakes his head when he thinks of what BlueCross has become today: A company that served 3.5 million members and paid out $15.2 billion in claims in 2018. It has 6,500 employees, including 800 nurses. The company has paid $3.8 billion in local, state and federal taxes over the past decade and contributed $90 million to community programs through the BlueCross BlueShield of Tennessee Health Foundation and Community Trust.

"Mr. Roy knew Erlanger needed help and he knew an insurance plan would help citizens in Chattanooga, so he created an insurance plan," said Germ. "It's just that simple. He knew what it would mean for the community."

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