Blue Shield of California

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Blue Shield of California
not-for-profit until 2014
Industry healthcare
Founded 1938 (created)
1939 (incorporated)
Founder California Medical Association
Headquarters Blue Shield of California Building
San Francisco, California
Key people
Paul Markovich,
President and chief executive
Revenue Increase $13.4 billion USD (2014)
Increase $307 million USD (2008)
Members 4 million
Number of employees

Blue Shield of California is a then not-for-profit health plan provider founded in 1939 and based in San Francisco, California. The organization serves over 4 million health plan members and nearly 65,000 physicians across the state.[1] Blue Shield of California was founded by the California Medical Association. In 2014, Blue Shield of California was stripped of its tax-exempt status by the California Franchise Tax Board.


Blue Shield of California, then known as California Physicians' Service, was created by the California Medical Association on December 18, 1938,[2] and was incorporated on February 2, 1939. The organization began offering coverage on March 6 of that same year. In 1946, the organization was among a founder of the National Association of Blue Shield Plans, which later became the Blue Cross and Blue Shield Association. Today, Blue Shield of California is an independent licensee of the national association.

The Blue Shield of California health plan was the first in the nation to offer catastrophic coverage in 1950, provide coverage for a heart transplant in 1984, offer online benefit and enrollment information in 1996, and offer an online enrollment system for agents in 1998. In 2006, the National Committee for Quality Assurance, commonly referred to as NCQA, recently recognized Blue Shield as an "excellent" health plan for service and clinical quality.[3]

In 2010, Blue Shield of California, Dignity Health, and Hill Physicians Medical Group formed an Accountable Care Organization that covers 41,000 individuals in the California Public Employees Retirement System (CalPERS). During its first 2 years, this program reduced inpatient use and health care costs significantly.[4]

In 2014, Blue Shield of California lost its exemption from California state corporate income tax but did not officially announce this information to the public until March 2015.[5] A claimed recent application of the Duck test was the denial of tax exempt "nonprofit" status to Blue Shield of California.[A]

In 2015, Blue Shield entered the Medicaid market by acquiring Care1st Health Plan.[7]


In 2006, Blue Shield agreed to a $6.5 million settlement relating to its alleged modifying of the risk tier structure of its individual and family health care plans. In 2008, the organization agreed to a settlement with the California Department of Managed Health Care to resolve allegations of improper rescission of individual health plan coverage. Blue Shield agreed to pay $3 million as a penalty. The organization reinstated coverage to 450 members whose plans had been cancelled and agreed to provide compensation for any medical debts incurred by these policyholders due to the rescission.[8]

Status changing[edit]

Blue Shield of California was stripped of its tax-exempt status by the California Franchise Tax Board in 2014. The Los Angeles Times has reported on an audit of the huge nonprofit California health insurer that was used in part as the basis for denying tax-exempt status. Blue Shield is contesting the decision; having to pay state taxes back to 2009 could cost the company more than $100 million. In a June 2014 letter to the company, tax board officials wrote that “Blue Shield is not operating exclusively for the promotion of civic betterment or social welfare,” according to the Times. And part of the reason was Blue Shield’s massive cash reserves, which had swollen to more than $4 billion by last year. Consumer advocates have criticized the company, saying it should use those amassed profits to provide more free or reduced-cost health care to needy Californians. The company says it already caps profits and provides abundant charity to Californians, and that some of the accumulated cash is earmarked for a major acquisition to expand its business into the Medicaid area.

Quality of care[edit]

In the California Healthcare Quality Report Card 2009 Edition, Blue Shield of California received 3 out of 4 stars in Meeting National Standards of Care and 2 out of 4 stars in How Members Rate Their HMO.[9]



  1. ^ "'In a startling blow to one of California's biggest health insurers, the state has revoked the tax-exempt status of Blue Shield of California, forcing the company to pay tens of millions of dollars in back taxes and unleashing a torrent of calls for it to return billions of dollars to customers. The tax board's action 'was an acknowledgment of what Blue Shield was already doing, or not doing,' said Anthony Wright, head of Health Access California, a consumer advocacy group. 'And if it looks like a duck and talks like a duck, it should be taxed like a duck.'"[6]


External links[edit]