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Revocation Of Blue Shield's Tax Exempt Status
By Barry Zalma, Esq., CFE - April 1, 2015

From the spirit of Barry Zalma-- Zalma's Insurance Fraud Letter (ZIFL)
On March 19, 2015, California Insurance Commissioner Dave Jones made the following statement in a press release in response to the California Franchise Tax Board’s decision to revoke Blue Shield of California’s tax-exempt status:
“The Franchise Tax Board decision to terminate Blue Shield’s tax-exempt status confirms what I have said for years – that Blue Shield charges excessive rates and acts like a for-profit health insurer. Blue Shield is also dodging the payment of premium taxes, by taking advantage of a legal loophole that allows Blue Shield to move its health insurance products from Department of Insurance regulation to Department of Managed Health Care regulation.
“The Department of Insurance collects premium taxes from all for-profit and non-profit health insurers. Blue Shield has moved most of its health insurance policies over to Department of Managed Health Care, to dodge my Department’s strong consumer protection regulation and our collection of premium taxes. We need to pass AB1434 by Assembly member Kevin McCarty to close the loophole that allows Blue Shield to move its health insurance products to the Department of Managed Health Care to avoid the strong consumer protection oversight of the Department of Insurance and avoid paying premium taxes. 
“Currently, the Blue Shield loophole costs the state $100 million in premium taxes annually. As a tax-exempt company with surplus of $4.2 billion, Blue Shield was able to accumulate an enormous amount of money on which it did not pay state taxes by evading the tax on the premiums it collects.”  
Blue Shield intends to appeal the decision. If true, if it acted as a for profit entity, this is an interesting fraud on the taxpayers of California.  ZIFL will watch the progress of the appeal.

Barry Zalma is an attorney, a CFE (Certified Fraud Examiner), and an expert witness for myriad types of insurance fraud. His website is at   To read his blog, go to
copyright © Barry Zalma; published with permission by adjustercom

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