Will Blue Shield of California eventually convert to for-profit?
Efforts by consumer advocates to put Blue Shield of California in the spotlight have been making headlines since the healthcare giant lost its tax-exempt status in March, and following their success in calling for a public hearing over BSCA's proposed $1.25 billion acquisition of Care1st, the pressure appears to be mounting.
The voice behind this pressure is former BSCA Director of Public Policy Michael Johnson, who recently resigned his post while publicly questioning whether the company is upholding its duty as a nonprofit to serve the public interest.
A dereliction of duty?
Johnson is the creator of makeitrightblueshield.org and on online petition at change.org, as well as an organizer behind the recent collaboration of the four consumer groups that called for the upcoming hearing on the Care1st acquisition. Those groups are Consumers Union, Health Access, Western Center on Law & Poverty and the California Public Interest Research Group.
Johnson argues the company's billions in assets belong to the public because of its former tax-exempt status and that the money should be used as effectively and efficiently as possible to strengthen the state's healthcare safety net.
He sees the hearing as one of many future efforts that could ultimately convince BSCA's board to change its status, despite current company statements that it plans to remain a non-profit. "There's no question that they are susceptible to public and political pressure," Johnson told Healthcare Dive.
Johnson intends to keep the spotlight on the company with each move it makes—not just the rates it charges but how it handles the recent allegations of wasteful spending made by the company's former chief technology officer, who was fired by BCSA.
Among the challenges, Johnson notes, is that pushing for BSCA to convert to for-profit status can seem counter-intuitive to the public. It takes some explaining to illustrate why he believes that will result in greater public good through the transfer of company assets to public benefit foundations.
Johnson believes that convincing the company to discuss converting would likely take one to two years. "To my knowledge it's not something the board has ever considered," he says. "It's hard to say what it would take to persuade the board that this is the right thing to do."
Blue Shield of California's response
BSCA responded to Healthcare Dive that it has a demonstrated commitment to the community. "A longtime supporter of healthcare reform, we limit our net income to 2% of revenue and have contributed $325 million to our foundation’s efforts to improve the health safety net and address domestic violence," the company wrote in a prepared statement.
It adds that the company pays federal income taxes, state gross premium tax and Affordable Care Act taxes and fees, and that it is challenging the California Franchise Tax Board's decision to revoke its tax-exempt status.
"The FTB decision has no bearing on our ability to continue to meet the needs of our members and community and we remain in strong financial health," the company states. "Regardless of whether we prevail in our tax dispute, we will remain a not-for-profit."
Will the spotlight spread?
It's possible the scrutiny of BSCA could influence advocates and regulators to look at other nonprofit Blue Cross Blue Shield plans as well, Johnson suggests.
"I can't imagine that it wouldn't [result in increased scrutiny of other plans]," Johnson says. "You've got substantially similar organizations in other states." Johnson says that when BSCA lost its federal tax-exempt status in the 1980s, similar Blue Cross Blue Shield plans across the country did as well..
"Now that you've got California joining the federal government in that view, it's hard to imagine other states wouldn't follow suit," Johnson said.
If federal and state tax authorities determine that plans aren't serving the public good, however, the bigger issue for the public is not tax status, but what happens with the assets of those organizations, Johnson says. He suggests that having a plan to put those billions to use for the public is critical.
"I think if California comes up with a way to do that, it's very likely that would serve as a model that other states would look to," Johnson said.