Hear­ing weighs Blue Shield deal

The in­surer comes un­der scru­tiny for its pro­posed pur­chase of Care1st Health Plan.

Los Angeles Times - - BUSINESS - By Chad Ter­hune

SACRA­MENTO — A top Cal­i­for­nia reg­u­la­tor vowed a “deep dive” into a $1.2-bil­lion ac­qui­si­tion pro­posed by Blue Shield of Cal­i­for­nia amid crit­i­cism that the non­profit in­surer is short­chang­ing the public.

Shel­ley Rouil­lard, direc­tor of the state Depart­ment of Man­aged Health Care, sig­naled tough scru­tiny ahead for Blue Shield’s pro­posed pur­chase of Med­i­caid in­surer Care1st Health Plan at a hear­ing she held Mon­day at the re­quest of sev­eral con­sumer groups.

Paul Markovich, Blue Shield’s chief ex­ec­u­tive, de­fended the pro­posed pur- chase of the Mon­terey Park in­surer as a boon for some of Cal­i­for­nia’s poor­est pa­tients on Medi-Cal and fired back at his com­pany’s foes for spread­ing mis­in­for­ma­tion.

The public de­bate over Blue Shield has in­ten­si­fied ever since the Los An­ge­les Times re­ported in March that the Cal­i­for­nia Fran­chise Tax Board had re­voked the com­pany’s ex­emp­tion from state in­come taxes in Au­gust 2014 af­ter a lengthy au­dit.

Nei­ther the tax board nor Blue Shield will dis­close de­tails of the au­dit or the rea­sons for the re­vo­ca­tion. The San Fran­cisco in­surer is protest­ing the rul­ing and said it plans to re­main a non­profit re­gard­less of the out­come.

Blue Shield pays fed­eral in­come taxes and es­ti­mates that it will pay about $26 mil­lion an­nu­ally into the state’s cof­fers with­out its ex­emp­tion. The com­pany is the

state’s third-largest health in­surer, with about 3.3 mil­lion cus­tomers and $13.6 bil­lion in rev­enue last year.

One of the big­gest de­bates Mon­day was whether some por­tion of Blue Shield’s $4.2 bil­lion in re­serves is sub­ject to char­i­ta­ble trust obligations. If it is, that could limit how the com­pany can use the money to ac­quire Care1st.

The is­sue stems from whether Blue Shield, as a non­profit mu­tual ben­e­fit cor­po­ra­tion, has some obli­ga­tion or duty to the public and whether some of its as­sets built up since its found­ing in 1939 are public as­sets.

An­thony Wright, ex­ec­u­tive direc­tor of Health Ac­cess, said a non­profit in­surer such as Blue Shield could use its ex­cess re­serves to drive down pre­mi­ums for con­sumers statewide or to bet­ter serve pa­tients or geo­graphic ar­eas that are his­tor­i­cally ne­glected, rather than buy Care1st.

“We un­der­stand why this benefits Blue Shield. It gives them a ma­jor in­crease in the mar­ket share of Medi-Cal,” Wright said. “It’s im­per­a­tive for the Depart­ment of Man­aged Health Care to make sure this benefits the public and pa­tients.”

Rouil­lard said the ques­tion of whether Blue Shield has a char­i­ta­ble trust obli­ga­tion is un­re­solved in her mind and marks one part of a very com­plex trans­ac­tion.

“I have not yet determined whether Blue Shield has as­sets sub­ject to a char­i­ta­ble trust obli­ga­tion,” she said. “We will do a deep dive into as much in­for­ma­tion as we can.”

State of­fi­cials haven’t given a timetable for when they will reach a de­ci­sion. Blue Shield an­nounced the deal in De­cem­ber and had ex­pected to com­plete the ac­qui­si­tion this year.

Markovich pushed back on the no­tion that Blue Shield had any links to a char­ity. In­stead, the com- pany em­pha­sized that it is set up as a non­profit mu­tual ben­e­fit cor­po­ra­tion that serves its mem­bers or pol­i­cy­hold­ers and can­not have any char­i­ta­ble or public obli­ga­tion.

“Blue Shield’s so­cial wel­fare mission is to en­sure qual­ity, af­ford­able care for all Cal­i­for­ni­ans,” he said, shar­ing the au­di­to­rium stage with Rouil­lard. “It will bring great ben­e­fit to the public when we ful­fill it, but it does not make us a public char­ity.... Blue Shield is not and never was a public char­ity.”

Markovich also sought to dis­miss any spec­u­la­tion that Blue Shield wants to be­come a for-profit health in­surer. He likened the idea to fic­tional sight­ings of Big­foot and the Loch Ness mon­ster, elic­it­ing some laughs from the au­di­ence.

Some of the tough­est crit­i­cism came from one of Blue Shield’s for­mer ex­ec­u­tives, Michael John­son. The for­mer public pol­icy direc­tor told reg­u­la­tors that Blue Shield isn’t be­ing hon­est with state of­fi­cials. He said Blue Shield told the Fran­chise Tax Board it could not dis­trib­ute as­sets to pri­vate peo­ple if it were to dis­solve be­cause it was pro­hib­ited from do­ing so.

John­son con­trasted that po­si­tion with the com­pany’s cur­rent state­ments to health reg­u­la­tors that its as­sets would go to its pol­i­cy­holder mem­bers in the event of a dis­so­lu­tion.

Blue Shield de­nied that charge Mon­day, say­ing it has con­sis­tently de­scribed its obligations to mem­bers.

Dur­ing the public tes­ti­mony, sev­eral med­i­cal providers and health pol­icy ex­perts ex­pressed sup­port for Blue Shield buy­ing Care1st and serv­ing Medi-Cal pa­tients for the first time. Care1st serves about 500,000 pa­tients, most of them Medi-Cal mem­bers in L.A. and San Diego coun­ties.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.