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Blue Shield of California slammed during public hearing

State officials plan "deep dive'" into proposed $1.2B Care1st acquisition
June 9, 2015 | By
Tools

Following accusations that Blue Shield of California refused to disclose how much it will spend to acquire Medicaid nonprofit insurer Care1st, the state's Department of Managed Health Care Director Shelley Rouillard vowed during a public hearing Monday to "deep dive" into the matter, reported the Los Angeles Times.

The saga began back in March, when the California Franchise Tax Board announced it had revoked the tax-exempt status of Blue Shield. The San Francisco-based nonprofit insurer posted $13.6 billion in revenue in 2014.

During the hearing Monday, the debate surfaced whether Blue Shield's $4.2 billion reserve is subject to charitable trust obligations. If that's the case, it could limit how the insurer can utilize those funds to purchase Care1st--Blue Shield has proposed spending $1.2 billion to acquire the company, noted the LA Times.

Rouillard mentioned that Blue Shield's charitable trust obligation status is unresolved in her mind, but it is something she intends to investigate further.

In defense of Blue Shield's proposed transaction, CEO Paul Markovich said a Care1st acquisition would benefit California's poorest patients on MediCal, reported the LA Times.

Additionally, Markovich pushed back on the notion that Blue Shield was linked to a charity. He added that, because of the company's nonprofit status, its intention is to serve its members and policyholders. Markovich also denied rumors that Blue Shield would become a for-profit insurer.

Former Blue Shield executive Michael Johnson attended the hearing. He claimed the insurer wasn't honest with state officials and that Blue Shield had told the Franchise Tax Board it could not divvy up assets to private people if it were to dissolve because it's prohibited to do so, noted the LA Times.

State officials did not say when they'd reach a decision. Blue Shield announced last December its plans to acquire Care1st; the insurer expects to complete the deal this year.  

For more:
- here's the Los Angeles Times piece

Related Articles:
Fired Blue Shield of California exec faces scrutiny for lavish spending
Former Blue Shield of California exec files wrongful termination suit
Blue Shield of California loses tax-exempt status
How Blue Shield of California could redeem itself
Secretive Blue Shield of California acquisition faces scrutiny

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