CALIFORNIA—On June 3, 2014, tax officials sent a 16 page report to Blue Shield California, the state’s third largest insurer. The tax board did not comment on why Blue Shield was audited, but after consideration it was decided that the non-profit health plan provider would now have to pay state taxes. They had earlier cited confidentiality reasons for not making the records public.
Tax officials say that Blue Shield has an excess of $4.2 billion and has not been able to provide more affordable health care, therefore, they will no longer be exempt from state taxes. It was also noted that top positions in the company promoted profitability.
Blue Shield officials are trying to appeal this decision, arguing that they give $30 million to charity every year and limit their income by returning 2 percent to the community.
Blue Shield will still be known as a non-profit, but they will be required to pay state taxes. They have been paying federal taxes since 1986.
According to their financial summary, Blue Shield’s net income (total profit) was $162 million in 2014, which was less than the $171 million in 2013. In a 2008 report, their net income was $307 million.
While their appeal is pending, they have paid $62 million in taxes for 2013-2014.
Despite the Franchise Tax Board’s initial refusal, Blue Shield has pushed for the appeal as they would like to purchase Care 1st, which offers Medicaid. According to their website, they had reached a “definitive agreement” as of December 8, 2014 with the Los Angeles based company. The cash transaction for Care 1st is set to take place later in 2015.
They must first get government approval for the $1.2 billion needed to acquire the company.
With the purchase of Care 1st, Blue Shield will enter the Medi-Cal system, which will provide access to 11 million Californians. Blue Shield already caters to 3.4 million residents.