Talks on Blue Cross Charities Come Under Fire : Insurance: Closed meetings are at issue. Consumer advocates are told to write a letter.


A consumer group has sharply criticized a state agency’s supervision of a Blue Cross of California plan to distribute more than $2 billion in charitable funds to health care organizations.

The issue involves talks between the California Department of Corporations and Blue Cross about the insurer’s charitable responsibilities since nonprofit Blue Cross spun off most of its private operations into a for-profit subsidiary, WellPoint Health Networks.

For the record:

12:00 AM, Aug. 12, 1994 For the Record
Los Angeles Times Friday August 12, 1994 Home Edition Business Part D Page 2 Column 4 Financial Desk 2 inches; 43 words Type of Material: Correction
Gary Mendoza--In a story in Thursday’s editions, a comment by California Department of Corporations Commissioner Gary Mendoza should have read: “I can’t judge my performance based on how I’m being praised or criticized by any particular interest group. I think our department will be judged by our results.”

Consumers Union, which publishes Consumer Reports magazine, Wednesday accused the Department of Corporations of “secret negotiations” with Blue Cross. It asked Corporations Commissioner Gary Mendoza to hold public meetings and provide more information about the discussions with Blue Cross.

Consumers Union officials said they asked to meet personally with Mendoza to discuss their concerns about the Blue Cross plan but were told that such a meeting could jeopardize negotiations with the insurer.


“As a general matter, I don’t think it’s helpful to negotiate through the media,” Mendoza said. He said he asked the consumer group to submit its concerns in writing.

“These negotiations are about $2.5 billion in public funds, and that’s a lot of money,” said Maryann O’Sullivan, an attorney at Consumers Union’s office in San Francisco. “The idea of (Mendoza) saying, ‘I don’t want to meet with you because it might jeopardize sensitive negotiations with Blue Cross'--I don’t understand that from a public official.”

After Blue Cross decided to form the WellPoint subsidiary, the state opened talks with the insurer about its charitable payments. In exchange for its tax-exempt status, Blue Cross is required to make charitable contributions to public groups in an amount equal to the value of the assets that were converted to for-profit status.

Based on Wednesday’s stock prices, the 80% of WellPoint that Blue Cross owns is worth roughly $2.5 billion.


The state has been pressuring Blue Cross to increase its charitable giving. In May, Blue Cross said it would donate $100 million this year to health care charities.

By Sept. 15, Blue Cross is supposed to submit to the state a plan for meeting its future charitable obligations.

Consumers Union said Mendoza should make public the criteria by which it will evaluate the Blue Cross plan. It also asked that future meetings between Blue Cross and the Department of Corporations be open to the public and that public hearings be held after the plan is submitted.

Mendoza said the state is protecting the public’s interest in its negotiations with Blue Cross.


“I can’t judge my performance based on how I’m being praised or criticized by any public interest group,” he said. “I think our department will be judged by our results.”