Dive Brief:
- The decision last year to revoke Blue Shield of California's state tax-exempt status was found to be justified by a new audit that was highly critical of the company for building up more than $4 billion in surpluses.
- The California Franchise Tax Board's audit called out Blue Shield's "extraordinarily high surpluses" and said they failed to provide appropriately affordable coverage or other sufficient public benefits, the Los Angeles Times reported over the weekend.
- The auditors reported that the company's operations were indistinguishable from those of competing for-profit health insurance providers.
Dive Insight:
Blue Shield has faced major scrutiny since the loss of its tax-exempt status came to public light this spring; it has drawn negative attention regarding the size of its reserves and its proposed $1.2 billion purchase of Medicaid insurer Care1st.
The company is still appealing the state's tax decision, arguing that it provides $30 million in charity annually and has voluntary 2% cap on profits. Auditors, however, have been uncovinced and note that the company's instructions for top executives are to "maximize profitability."
"Blue Shield is not operating exclusively for the promotion of civic betterment or social welfare," officials wrote in their 16-page report.
Want to read more? You may enjoy this story about whether Blue Shield of California will eventually convert to for-profit.