Insurer Blue Shield of Californias new parent company alarms consumer advocates

Last year, regulators approved a request by Blue Shield of California, the state’s third-largest health insurer, to restructure and establish a new parent corporation in Delaware.The Oakland-based nonprofit got the go-ahead from the Department of Managed Health Care, or DMHC, to create an entity called Ascendiun Inc., which is now the out-of-state corporate parent of Blue Shield.The insurer said that the restructuring would allow it to better serve its members “with less bureaucracy and faster results, while making health care more affordable.”But the transaction has raised alarm among a former high-level Blue Shield executive and consumer advocates, who complain that it was carried out with no public oversight and could allow the insurer to transfer money to a Delaware parent company with few strings attached.

The activists claim that some of that money could be used to boost its spending on charitable endeavors.The company has accrued a surplus of more than $4 billion over the decades as it benefited from its former tax-exempt status, according to a regulatory filing.“The move guts the ability of the DHMC to enforce Blue Shield’s nonprofit obligations to the California public and gives Blue Shield’s directors ...

a virtually free hand to make use of Blue Shield’s billions of dollars in charitable assets as they please,” wrote Michael Johnson, the insurer’s former vice president of public policy, in a recent letter to Mary Watanabe, director of the department, which was reviewed by The Times.Johnson is calling for the department to rescind its approval and unwind the restructuring.The department maintains that the insurer is not subject to charitable trust rules as a nonprofit mutual benefit corporation.In a statement, the department said it “maintains full regulatory authority and enforcement of all Blue Shield of California health plan operations,” and reviewed the transaction to ensure that it will not harm the plan’s financial viabil...