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California decision to end Blue Shield's tax exempt status faces questions

Consumer Watchdog wants records made public to see how other non-profit payers stack up

One advocacy group believes that state officials may have wrongly taken away Blue Shield of California's tax-exempt status, so it's demanding to see public records related to the decision, reported California Healthline.

The California Franchise Tax Board revoked the tax-exempt status of the nonprofit Blue Shield last August, FierceHealthPayer previously reported. Consumer Watchdog says the records related to that decision will help inform whether other states could take similar steps against their non-profit insurers. In fact, some industry experts predict that other large nonprofit insurance companies could be scrutinized over how they serve the public.

"There are many reasons we can point to but we're more interested in seeing which reasons the state took into account when it made this decision," Jerry Flanagan, lead staff attorney for Consumer Watchdog, told Healthline. "If we can see the records and how they were interpreted we can look at some of the other huge tax-exempt corporations like Kaiser and Dignity and Sutter and see if they're measuring up."

Consumer Watchdog also wants to know why the Franchise Tax Board waited so long to tell residents. Although the agency declared in August that the insurer no longer qualified for exemption from state taxes, it didn't disclose the decision until March.

"These records are of utmost importance. Millions of Californians who purchased and renewed their health insurance with Blue Shield during the last Obamacare open enrollment period late last year believed Blue Shield was nonprofit," Flanagan said. "The public has the right to know why the Franchise Tax Board revoked Blue Shield's tax-exempt status."

Franchise Tax Board officials told California Healthline that they "cannot provide the requested information due to confidentiality laws." But Flanagan believes they're misinterpreting the state's confidentiality laws and claims the information he's seeking should be publicly available.

"We hope they rethink their decision and decide to make the information public, but if they don't we're not going to just go away," he said, adding that Consumer Watchdog will seek a writ of mandate if needed.

To learn more:
- here's the California Healthline article

Related Articles:
It's time to make Blue Shield of California a for-profit insurer
Blue Shield's tax exemption loss could trigger cascade
Blue Shield of California pushes non-profit insurers into spotlight
Blue Shield of California loses tax-exempt status