Unbiased Analysis of Today's Healthcare Issues

Insurers: Non-profit or For-profit?

Written By: Jason Shafrin - Mar• 19•15

The answer is “no” according to the California Franchise Tax Board.

California tax authorities have stripped Blue Shield of California, the state’s third largest insurer, of its tax-exempt status in California and ordered the firm to file returns dating to 2013, potentially costing the company tens of millions of dollars.

Why did California claim that Blue Shield was a for-profit? The L.A. Times reports:

The move by the California Franchise Tax Board comes as the state’s third-largest health insurer faces fresh criticism over its rate hikes, executive pay and $4.2 billion in financial reserves.

Has a non-profit insurer ever changed into a for-profit? The answer is “yes”.

…in the 1990s, Blue Cross of California, at the time a nonprofit insurer, converted to a for-profit company. Some of the assets held by the nonprofit were used to create large foundations in the state, including the California Endowment and the California HealthCare Foundation.

Will this move affect consumers? Likely not. Blue Shield rates were already in line with competitors and due to the competitive California market, increasing rates faster than their competitors may be difficult.

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