Leon Panetta said he joined the board of Blue Shield because it is nonprofit and serves the “welfare of the entire community.” If he meant what he said, he needs to bring management into line.

Blue Shield, which made headlines yesterday with its lavish and secretive compensation of top executives, is accused in a class action lawsuit of failing to pay its lowest-paid workers their full wages.

In a message to employees, Blue Shield CEO Paul Markovich laughed off a front-page LA Times article detailing blistering criticism of the nonprofit by California authorities who revoked its tax exemption.

Blue Shield should either act like a nonprofit and provide benefits to the public worth 5% of its assets or formally convert to for-profit status and relinquish its nonprofit assets to a public benefit foundation.

The revocation of Blue Shield's tax exemption made big news. But even more important is what happens with the $10 billion in nonprofit assets that the insurer will continue to hold.

State tax authorities revoked Blue Shield’s tax exemption last August, but it's been kept secret until now. 

After 12 years with Blue Shield of California, I resigned last week as Director of Public Policy. I’d raised concerns internally that Blue Shield wasn’t doing nearly enough to meet its duties to the public as a tax-exempt nonprofit, but senior management dismissed them.