Blue Shield’s Obligations as a Nonprofit, Post ACA: New Health Access Issue Brief for Community Discussion

With a DMHC hearing pending, Health Access is pleased to release a new issue brief for dialogue and open discussion: “What is the Role of a Nonprofit Insurer? Should the Affordable Care Act Change the Expectations of Insurers with a Public Service Mission?”

New questions have arisen about what it means to be a nonprofit health insurer in California, starting with Blue Shield of California, one of the state’s largest health plans. Last March, the Los Angeles Times reported that the state Franchise Tax Board (FTB) had quietly revoked Blue Shield of California’s tax-exempt status in August of 2014 and asked the insurer to file returns going back to 2013.  Blue Shield has actually been paying federal taxes since 1986, when Congress stripped all Blue Cross-Blue Shield plans of their tax-exempt status. Blue Shield is appealing the FTB’s decision.

Blue Shield has also made a $1.25 billion bid to acquire Care1st, a for-profit Medi-Cal managed care plan based in Monterey Park.  This particular transaction would bring Blue Shield into the Medicaid (Medi-Cal) managed care market. Blue Shield’s bid, together with longstanding concerns about its surplus growth, prompted several consumer advocacy groups to request a public hearing on the proposed transaction. The Department of Managed Health Care (DMHC), which oversees managed care plans, has scheduled a hearing for June 8, 2015 1:30 – 3:30 p.m. 1500 Capitol Avenue, Sacramento CA 95814 1st Floor Auditorium (see the agenda here).

Californians have a lot of stake in Blue Shield’s tax-exempt status and its community benefit obligations as a nonprofit. DMHC’s hearing will bring these issues into the public arena for full debate. This issue brief seeks to contribute to the discussion on Blue Shield’s public service mission in light of its bid for Care1st and the state’s recent revocation of its tax-exempt status, and asks how and to what extent the Affordable Care Act (ACA) reframes those obligations.

Find the 6-page brief here.

Health Access welcomes further discussion on these issues and will look forward to incorporating input from coalition allies and community stakeholders into a future version of this brief. Please send comments on what should be the activities and governance of a health plan with a public service mission to Judi Hilman at  Or, visit our Facebook page to share your comments there.

We would appreciate comments on any of the following questions:

  • What would a health insurer with a public service mission look like?
  • If Blue Shield of California embraces any or all of these roles, would that be a better benefit to the health of Californians than redirecting the value of Blue Shield’s assets more directly toward these goals?
  • What are the possible impacts on the health care market overall? What are the implications for other nonprofit health insurers, and other health institutions in general? And how can this discussion advance California toward an improved health system and a healthier state?