California Healthline, Wednesday, March 18, 2015

The California Franchise Tax Board has stripped the not-for-profit Blue Shield of California of its tax-exempt status, the Los Angeles Times reports.


According to the Times, the tax-exempt status revocation comes as Blue Shield has faced criticism over its:

  • Executive pay;
  • Rate hikes; and
  • $4.2 billion surplus.

According to the Times, Blue Shield’s surplus at the end of 2014 was four times as much as what the Blue Cross and Blue Shield Association requires insurers to stockpile to cover future claims.

Advocates also have criticized Blue Shield for failing to serve Medi-Cal beneficiaries. Medi-Cal is California’s Medicaid program.

In addition, critics have raised concerns about Blue Shield’s lack of transparency. For example, the insurer’s 2012 filings did not list any executive employees by name.

Michael Johnson, former public policy director at Blue Shield, said that the insurer has been “shortchanging the public” for years. Johnson said that he plans to launch a campaign to convert the insurer into a for-profit company and force it to return billions of dollars to the public.

Details of Revocation

A California Franchise Tax Board spokesperson declined to comment on why Blue Shield’s tax-exempt status was revoked, but officials have ordered the insurer to file tax returns for each year back to 2013.

On Tuesday, Blue Shield said it would protest the decision.

Blue Shield spokesperson Steve Shivinsky said, “Blue Shield as a company and management team firmly believes it is fulfilling its not-for-profit mission and commitment to the community.”


Anthony Wright, executive director of Health Access, said, “It’s important to have this debate over Blue Shield’s public-service mission and how they are fulfilling it.”

In addition, Dena Mendelsohn, a health policy analyst at Consumers Union, said that the insurer’s “lack of transparency makes it hard to understand whether Blue Shield is holding up their end of the bargain with the public” (Terhune, Los Angeles Times, 3/18).

Source: California Healthline, Wednesday, March 18, 2015