California regulators and consumer groups say insurance giant Blue Shield of California is reneging on a $140-million charitable pledge it made to win approval for a big acquisition.
State officials said last month that the San Francisco insurer had agreed to give $14 million annually for 10 years to Blue Shield's foundation or another charity – in addition to its regular contributions.
Regulators touted the $140-million commitment as part of a deal approving Blue Shield's $1.2-billion acquisition of Medicaid insurer Care1st Health Plan.
But Blue Shield says the agreement calls for a minimum donation of $14 million annually, and it's under no obligation to go beyond its normal foundation giving of about $35 million annually.
"We are honoring the agreement that was negotiated with the state," company spokesman Steve Shivinsky said Tuesday.
Consumer advocates expressed outrage at Blue Shield's stance.
"It's unfortunate the agency and the public got snookered out of $140 million for our safety net," said Anthony Wright, executive director of Health Access, which raised the issue with regulators. "It's outrageous, and we shouldn't allow Blue Shield to weasel out of this."
In response to these complaints, Shelley Rouillard, director of the Department of Managed Health Care, also expressed her dissatisfaction with Blue Shield.
In a Nov. 12 letter to the company, Rouillard said her "expectation in approving the transaction was that Blue Shield would increase its overall charitable contributions to improve healthcare delivery in California. This intent was expressed during the negotiations process."
But she stopped short of requiring Blue Shield to boost its giving, acknowledging that "reasonable people may disagree about the meaning of the language" in the state agreement.
Last month, Blue Shield Chief Executive Paul Markovich insisted in an interview with The Times that the $140-million pledge didn't represent additional money.
Instead, Markovich pointed to an extra $60 million Blue Shield agreed to invest in several healthcare initiatives, including a statewide provider directory and money for consumer assistance programs.
"That's a pretty large sum," Markovich said of the $60 million.
Shivinsky, the company spokesman, said Rouillard's letter "makes clear what we agreed to. The $14 million a year was set as the floor."
Blue Shield's corporate conduct has come under intense scrutiny for the past year after officials revoked its longtime state tax exemption.
Auditors at the California Franchise Tax Board criticized the insurer for stockpiling "extraordinarily high surpluses" of $4 billion and for failing to offer more affordable coverage as a nonprofit. California Insurance Commissioner Dave Jones is also investigating Blue Shield's disclosures on executive compensation.
Wright said he and other consumer advocates will continue to press Blue Shield's board and state policymakers to address these merger conditions.
"If Blue Shield really wants to assert it has a nonprofit mission, as it actively markets itself," Wright said, "it would abide by the spirit of the conditions and make the additional contributions to improve the state's safety-net as many expected."