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Blue Shield of California pushes nonprofit insurers into spotlight

Nonprofits pushed to prove they deliver on community mission amid tight state budgets

Now that Blue Shield of California has lost its tax-exempt status and owes tens of millions of dollars in state taxes annually, industry experts predict that other large nonprofit insurance companies could be scrutinized over how they serve the public, reported AIS Health.

The pressure stems largely from depleted state budgets and an increasing number of people who are criticizing companies' financial reserves.

"This is a bellwether of increased pressure on nonprofit healthcare organizations to prove that they're delivering on their community missions," Sam Glick, a principal in the San Francisco office of consulting firm Oliver Wyman, told AIS Health. "The need for a social safety net is greater than ever, state budgets are squeezed and governments are looking at every option for closing that gap."

Indeed, some California lawmakers and consumer groups are trying to coerce Blue Shield of California to convert into a for-profit company and return its reserves to the state.

When state officials revoked Blue Shield's tax-exempt status, they essentially said the insurer "is making enough money, enough profits that they need to pay taxes on them ... just like any for-profit company," Consumer Watchdog Executive Director Carmen Balber said.

Blue Shield had more than $4 billion in reserves last year, which is almost 1,300 percent more than the state requires a nonprofit company to maintain, she added.

Agreeing with Balber is Michael Johnson, who resigned last month as Blue Shield's director of public policy. By forcing Blue Shield to pay taxes, the state shows that Blue Shield "is not doing public good," he said. Johnson wants Blue Shield return roughly $10 billion in community assets to the state, FierceHealthPayer previously reported.

"If Blue Shield isn't doing public good, what about that $10 billion asset that they have control over? Does it make sense for them to continue to have control of that public money?" he questioned when speaking with AIS Health.

To learn more:
- read the AIS Health article

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Blue Shield of California loses tax-exempt status
How Blue Shield of California could redeem itself
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