Blue Shield Tries To Back Out Of $140 Million Commitment to California Communities

When nonprofit insurer Blue Shield California made a $1.2 billion bid to acquire Care1st, a Medi-Cal managed care plan serving 500,000 Southern California patients, it agreed to conditions set forth by DMHC (Department of Managed Health Care), including a commitment to increase its investment in the state’s safety net by an additional $140 million over 10 years. But this week Blue Shield disavowed this commitment, stating that it sees the $14 million requirement as a “floor” for its annual giving to the safety net.

Given the nonprofit insurer’s usual giving levels of about $35 million a year, Health Access California has raised concerns with DMHC that the insurer might actually do less for the safety net if its interpretation of the conditions is allowed to stand.  DMHC Director Shelly Rouillard seems to share some of our concerns. In a letter dated November 12, 2015 Rouillard reiterated her expectation, expressed during the negotiations process, that “Blue Shield would increase its overall charitable contributions to improve healthcare delivery in California (learn more in today’s LA Times).”

Health Access, the statewide health care consumer advocacy coalition, is directly urging Blue Shield of California, to abide by its historic nonprofit mission and contribute an additional $14 million/year for 10 years to its charitable foundation for safety-net funding—as was clearly expected when state regulators approved their acquisition of Care1st.

Earlier this year when Blue Shield of CA moved to acquire Care1st, it came under intense scrutiny for excessive $4 billion surpluses and for denying the charitable obligations that would ordinarily apply to those and other assets. Last July Health Access California and other consumer advocacy organizations sought strong conditions on the merger to address its potential negative impacts. The DMHC did impose some but not all of the undertakings (activities to meet charitable obligations) sought, including a commitment of $200 million for specific projects and goals to help reassure that this merger was in the public interest, including $140 million over 10 years to the Blue Shield of California Foundation to improve the state’s safety-net.

More recently further issues have been raised around the insurer’s inaccurate provider directories, unreasonable rate increases, and other practices not consistent with the behavior expected of a nonprofit insurer.

This week’s events raise serious questions about whether BlueShield is exploiting loopholes on other merger conditions or other consumer protections, prompting Health Access to seek stronger and more airtight conditions for the even-bigger mergers coming up for approval in the next few months.

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