March 18, 2015

Blue Shield of California Loses State Tax-Exempt Status

The California Franchise Tax Board quietly stripped the state's third-largest health insurer of its tax-exempt status in August without citing reasons for the unusual move, the Los Angeles Times reports.

Nonprofit Blue Shield of California pays federal taces but has been exempt from state taxes since its founding in 1939. Now the insurer may be liable to pay the state tens of millions of dollars annually in addition to filing tax returns back to 2013.

This comes in the wake of a state audit of the insurer that looked at the justification for its exempt status. Blue Shield has been criticized for rate increases, executive compensation, and large financial reserves.

Michael Johnson, public-policy director for the insurer who resigned last week says the organization has been "shortchanging the public" for years and is calling for the group to convert into a for-profit.