With billions in the bank, Blue Shield of California loses its state tax-exempt status

[flowers]

http://www.latimes.com/business/la-fi-blue-shield-california-20150318-story.html#page=1

Authorities have revoked the tax-exempt status of nonprofit Blue Shield of California, potentially putting it on the hook for tens of millions of dollars in state taxes each year.

The move by the California Franchise Tax Board comes as the state's third-largest health insurer faces fresh criticism over its rate hikes, executive pay and $4.2 billion in financial reserves.

The state quietly stripped the San Francisco insurer of its exemption from California income taxes in August. The company held that since its founding in 1939.

A spokeswoman for the tax agency declined to comment on the reasons for revocation. The highly unusual action comes after a lengthy state audit that looked at the justification for Blue Shield's taxpayer subsidy. The insurer has paid federal taxes for years.

Blue Shield said Tuesday that it's protesting the decision. In the meantime, state officials have ordered it to file tax returns back to 2013.


Blue Shield has about 3.4 million customers and 5,000 employees and posted $13.6 billion in revenue last year. It trails only nonprofit Kaiser Permanente and for-profit Anthem Inc. in statewide enrollment.

Now, a company insider has sided with critics. Michael Johnson, who resigned as public policy director last week after 12 years at the company, said the insurer has been "shortchanging the public" for years by shirking its responsibility to Californians and operating too much like its for-profit competitors.

On Wednesday, Johnson plans to launch a public campaign calling on executives to convert the insurer into a for-profit company and return billions of dollars to the public that could be used to bolster the state's healthcare safety net. He estimates the company could be worth as much as $10 billion.

Switching an insurer to for-profit status has happened before in California and across the country.

[truth_seeker]

Wow. Big institutions deserve scrutiny. "For profit" corporations are watched by their shareholders, their customers, their employees, and of course by the government tax collecting authorities.

I hold no grudge with Blue Shield, but be certain they have numerous 6 and 7 figure execs, plus 7 and 8 figure law firms, with less scrutiny, until this development.