- The California Franchise Tax Board has stripped nonprofit Blue Shield of California of its tax-exempt status and demanded that it file tax returns back to 2013.
- The insurer has faced increased criticism over its rate hikes, generous executive pay and $4.2 billion in financial reserves.
- The tax agency has failed to comment on the reason for its action. Blue Shield of California has said that it will be protesting the decision.
Blue Shield is a huge player, with 3.4 million customers and $13.6 billion in 2014 revenue. Only Kaiser Permanente (nonprofit) and Anthem Inc. (for-profit) lead it in terms of statewide enrollment. Yet the company's $4.2-billion surplus is four times the amount members are required to maintain by Blue Cross and Blue Shield Assn.
"Blue Shield's surplus is significantly more than needed to protect their solvency," Dena Mendelsohn, a health policy analyst at Consumers Union in San Francisco, told the LA Times.
Meanwhile, the company's former public policy director Michael Johnson resigned last week after 12 years with Blue Shield. Johnson intends to launch a public campaign to push the company to convert into a for-profit. He claims the insurer has been "shortchanging the public" by operating too much like a for-profit insurer.