Questions On The Blue Shield Of California Decision

According to an article in The LA Times, Blue Shield of California, the state’s third-largest health insurer, lost its state tax-exempt status—a benefit it has enjoyed since 1939. According to the article, Blue Shield California has received sharp criticism for high executive compensation, insurance rate hikes for consumers, and billions of dollars in financial reserves. Interestingly, the California Franchise Tax Board has not cited any reason for revoking its tax-exempt status and has declined to comment on the matter. Furthermore, the Franchise Tax Board is considering whether to require Blue shield to pay back taxes.

All one can do is speculate, but what justification might the state have for pulling Blue Shield’s exempt status? Is this a decision based in popular politics rather than law? How might Blue Cross want to approach a challenge to the Board’s decision?

DAB