Following an audit by the California Franchise Tax Board, health insurer
Blue Shield of California is no longer eligible for tax-exempt status
as a non-profit entity. The reasons cited in the audit report included
stockpiling "extraordinarily high surpluses” and failing to
advance social welfare.
detailed by the
Los Angeles Times, Blue Shield is the state's third-largest health insurer with 3.4
million customers, 5,000 employees and $13.6 billion in revenue last year.
The company’s cash reserves topped $4 million in 2012. The auditors
specifically noted that the surplus nearly doubled from $2.26 billion
in 2006 to $4.15 billion in 2012, the last year examined.
"We assert that the extraordinarily high surpluses set aside as reserves
by Blue Shield are not kept for the purposes of stabilizing the organization
but rather for the commercial purpose of increasing competitiveness,"
the audit report states. "We observed that Blue Shield far exceeded
the reserves required either by law or the best practices and standards
of the healthcare industry."
The auditors also found that Blue Shield’s emphasis on maximizing
profitability was “inconsistent with an organization organized as
a nonprofit which desires tax-exempt status." They further found
that Blue Shield was not doing enough to benefit the community, citing
that it does not provide any free or significant below-cost healthcare
plans to the general public.
The public release of the California Franchise Tax Board’s report
has subjected Blue Shield to greater public scrutiny, with many consumer
advocacy groups calling for further action. "These dollars should
be dedicated to the public welfare through reduced-price insurance and
serving the health needs of vulnerable populations to truly differentiate
the nonprofit from for-profit companies," Betsy Imholz, special projects
director for Consumers Union in San Francisco, stated. “The public
is the 'shareholder' of every nonprofit, including Blue Shield."
San Diego medical fraud lawyers, we will continue to monitor this issue. We are hopeful that the California
Insurance Commissioner and other state regulators will conduct a full
If you or someone you love has fallen victim to medical fraud, don’t
contacta San Diego personal injury attorney at the Law Offices of Robert Vaage for a free consultation.