California regulator to determine Blue Shield's public benefit duty

As reported in the Los Angeles Times, the Department of Managed Health Care made clear at a public hearing yesterday that it would carefully scrutinize Blue Shield’s proposed $1.2 billion acquisition of Care1st Health Plan. Most importantly, DMHC Director Shelley Rouillard said the review would include a detailed examination of Blue Shield’s "charitable trust" obligation, or duty to work for public benefit.

Blue Shield insists it has no such obligation. At the hearing, Judy Silas of Consumers Union, citing Blue Shield’s history and the evolution of California law on nonprofits, provided regulators a compelling legal analysis demonstrating otherwise.

In my comments, I urged the DMHC to get to the bottom of inconsistencies between what Blue Shield told the DMHC and tax authorities regarding a key point in Blue Shield’s argument about why it has no public benefit obligations. The truth about whether Blue Shield has misled state officials could easily be determined if Blue Shield were required turn over to the DMHC its audit-related communications. I also asked that the DMHC examine whether Blue Shield has failed to fulfill its nonprofit duties before making a decision on the acquisition.