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California Blue Shield’s future as nonprofit unclear after losing tax-exempt status

by AirTalk®

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Protesters advocate for health care reform in San Francisco's Financial District on October 28, 2009. Steve Rhodes/Flickr

Blue Shield of California may be on the hook for tens of millions of dollars in taxes owed each year to the state of California after the San Francisco-based insurer was stripped of its tax-exempt status back in August.

An L.A. Times article says the news comes months after the California Franchise Tax Board actually made the decision, raising questions of why no one knew about this until now. There have also been concerns about the surplus of $4.2 billion the insurer ended 2014 with, since it’s four times as much as the company would need to cover future claims. Blue Shield says it believes it is fulfilling its mission as a nonprofit and is protesting the decision. For now, they will have to file tax returns back to 2013. Blue Shield insures 3.4 million Californians and employs 5,000 people.

How will premiums be affected by Blue Shield’s loss of tax exempt status? Does Blue Shield stand a chance against the state in its appeal? What would the implications be for the insurer and consumers if Blue Shield became a for-profit company?


Anthony Wright, Executive Director for Health Access, a statewide health care consumer advocacy coalition based in Sacramento.

Yevgeniy Feyman, Fellow at the Center for Medical Progress at the Manhattan Institute

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