California Tax Auditors Yank Blue Shield's Non-Profit Status

[Unknown Beatle]

In a scathing audit, state tax officials slammed nonprofit health insurer Blue Shield of California for stockpiling "extraordinarily high surpluses" — more than $4 billion — and for failing to offer more affordable coverage or other public benefits.

The California Franchise Tax Board cited those reasons, among others, for revoking Blue Shield's state tax exemption last year, according to documents related to the audit that were reviewed by The Times. These details have remained secret until now because the insurer and tax board have refused to make public the audit and related records.

Blue Shield's operations are indistinguishable from those of its for-profit healthcare competitors, the auditors found, and it should be stripped of the tax break it has enjoyed since its founding in 1939. The insurance giant does not advance social welfare, the key test for preserving its tax exemption, according to the records.

"Blue Shield is not operating exclusively for the promotion of civic betterment or social welfare," tax board officials Christie Maddox and Eddie Murillo-Corona wrote to the insurer in a 16-page report sent June 3, 2014.

Read More: Crooks and Liars

[peacebird]

1. That's gonna leave a mark....

[NV Whino]

2. And guess what Blue Shield is going to do next.

[GummyBearz]

4. As someone covered by blue shield, I have only one guess

While the right decision was likely made, there should be stipulations that prevent them from abusing the heck out of the lord knows how many people in CA they cover. They've been playing both sides of the fence milking the tax system and the consumers.... now the consumer will likely get double milked. Obamacare can you help us???

[CaliforniaPeggy]

3. GOOD!

[Spitfire of ATJ]

5. There's a sign posted for employees at a lab I go to that tells them not to take Blue Shield....

Seems they refuse to pay.

[calimary]

9. And with Four BILLION dollars to their name, I think they can well afford to pay, don't you?

This tax exemption shit HAS to go. Just HAS TO GO. All they're interested in - is profit. Just another bunch of Ferengi. I felt the same way about the NFL. NO NON-PROFIT STATUS for them!!! "Non-profit" MY ASS. I was very glad when that news broke recently! They who rake it in as obscenely as these outfits do - DESERVE TO PAY THEIR FAIR SHARE.

[Spitfire of ATJ]

11. Edison was pleading for a rate hike in California a while back....

They claimed they were actually losing money. Not "making less than forecast" but actually showing a loss.

Then in the middle of pleading poverty they bought Angels Stadium in Anaheim.

They didn't get their rate hike.

[calimary]

12. I would suspect "creative booking" in their case.

You get slick enough accountants and they can bend the books any way you want.

[Spitfire of ATJ]

15. That's the old joke....

The boss advertizes for an accountant and interviews three of them in his hi-rise office.

He asks the first applicant, "What's 2 and 2?"

The guy says, "4."

Furious, he grabs the first guy and throws him out of his office window to plunge to his death.

He asks the second guy, "What's 2 and 2?"

The second guy says, "5?"

Furious, he grabs the second guy and throws him out of his office window to plunge to his death.

Turning to the final applicant he asks again, "What's 2 and 2?"

The third guy says with an evil grin, "What do you want it to be?"

The boss says, "Your hired!"

[calimary]

16. Precisely.

[Omaha Steve]

6. K&R!

[Cleita]

7. It's about time.

I hope they go after the rest of the non-profits who operate for profit.

[TexasBushwhacker]

8. And they just announced they're raising premiums

20 to 40%

[Unknown Beatle]

10. Well, there you go.

You can't mess with their profits.

[cui bono]

13. Just their nonprofits.

[kenfrequed]

19. Good luck with that

They still have to abide by the Franken Amendment which forces them to spend 80% of their collected revenue on actual healthcare.

[tavernier]

21. Yup, and blaming Obamacare.

The mafia's got nothing on insurance companies. What a racket. I hope they get penalized to the max!

[TexasBushwhacker]

25. I hope this behavior leads to single payer

I really wanted the ACA to work. But when this kind behavior continues by the health insurance companies, it shows that we need to go to single payer or at least a public option. If they let people buy into Medicare, it could shore it up bringing in younger, healthier members. They also need to allow Medicare to negotiate on drug prices.

[tularetom]

26. A lot of people were predicting 5 years ago that this kind of crap would happen

and that's why we needed at least a public option, because there is no such thing as a non-profit insurance company.

I don't think the president ever gave a thought to anything but a souped up private insurance program, despite what he said. I'd like to believe the whole Obamacare thing was umpteen dimensional chess, that he knew the greed of the insurers would eventually kill the ACA and result in an overwhelming public demand for single payer. But he's running out of time and unless Senator Sanders is elected president in 2016, I have no hope that such a demand will be heard.

[niyad]

14. when has blue shield ever actually been "non-profit"????

seriously, a huge insurance company "non-profit"???? in which multiverse???

[gratuitous]

17. "Operating exclusively for the promotion of civic betterment or social welfare"

Is that a California thing, or does it apply to all non-profits? Like, say, for American Crossroads, the political non-profit that Karl Rove founded and runs?

[Thor_MN]

28. One goes to the crossroads to make a deal with the devil...

https://en.wikipedia.org/wiki/Crossroads_%28mythology%29

[valerief]

18. Hmm, they just noticed? nt

[Alkene]

22. Nah,

the payoffs just dried up.

Or something like that.

[mountain grammy]

20. About time, K&R.

[uponit7771]

23. +1

[uponit7771]

24. "...and for failing to offer more affordable coverage or other public benefits..."

[rogerashton]

27. A nonprofit can hide profits pretty easily.

A nonprofit university I know pretty well ran a profit for years but put it in a "reserve fund" against future educational expenses, claiming that in so doing it was spending the money on its mission, education -- then the "reserve fund" was used for expansion. Now taking losses, there is no reserve fund to cover them.

Nonprofits, particularly in insurance, have been converted to for-profits. If that happens, the state government may claim a cut (in lieu of back taxes) or may require that the assets of the nonprofit be converted to a foundation with a mission somehow related to health. But in the process, the executives and directors get bonuses for their success in creating the conversion, and, if they continue as executives of the new company, probably stock options -- and the more cash the company has, the higher the new-issue stock price goes, the more benefit to insiders who get their stock at a concessionary price or as bonuses.

This is old but relevant:

http://www.forbes.com/2007/01/08/non-profit-conversions-biz-cz_crs_0109conversion.html

https://consumersunion.org/research/conversions-101/