State finds Blue Shield is not serving its nonprofit mission

While reporting the story of my protest resignation over Blue Shield's violation of its nonprofit duties, the Los Angeles Times uncovered a ruling made last August by state tax authorities revoking nonprofit’s tax exemption. That has made Blue Shield's failure to serve the public good a major news story.

It has also prompted state officials to chime in, most notably, Senate Health Committee Chairman Ed Hernandez, who said: “Blue Shield enrollees and the public at large are entitled to a reasonable return on the investment the state has made by granting Blue Shield tax-exempt status. I'm looking forward to finding out what exactly the public got for our money."

The important thing now is to make sure people and public officials understand that simply requiring Blue Shield to pay taxes—even back taxes—won’t solve the problem. Far more important is what happens with the multi-billion dollar public asset that Blue Shield represents.

Now that state tax authorities have determined that Blue Shield doesn’t provide sufficient benefit to justify a tax exemption that costs taxpayers about $40 million a year, does it makes sense to continue entrusting them with a public asset worth as much $10 billion? The alternative would be for Blue Shield to transfer its assets to the public for investment in healthcare safety net programs and to run their insurance business going forward as an investor-owned company with financial backing from private investors rather than the public.