CA Franchise Tax Board Revokes Blue Shield's Tax Exempt Status


The California Franchise Tax Board has revoked the State Tax Exempt Status of Blue Shield of California.  As a result, Blue Shield may be required to pay tens of millions annually as well as file tax returns retroactively back to 2013.  This move could undermine the 'not for profit' status of the carrier.  

Blue Shield currently holds approximately $4.2 Billion in reserve, an amount deemed excessive by the state of California and well above the amount recommended by the Blue Cross Blue Shield Association (of which both Blue Shield CA and Anthem Blue Cross are licensees).  

From the LA Times



"The main motivation for any state that wants to see a conversion of a health plan is they would capture the assets," he said.  That idea could prove popular in Sacramento, experts say, where state lawmakers are searching for money to boost Medi-Cal reimbursements for doctors and hospitals and to expand coverage for millions of uninsured Californians who don't qualify for federal help under Obamacare.

Blue Shield was founded by the California Medical Assn. as part of a national movement by hospitals and doctors to form prepaid health plans.  The company is a "mutual benefit" nonprofit — "dedicated to charitable, religious or public purposes," according to California corporation law.


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