The California Department of Managed Health Care (DMHC) will soon hear from both San Francisco-based Blue Shield of California and Medicaid insurer Care1st regarding Blue Shield's proposed acquisition of Care1st, the department announced this week.
The June 8 hearing was planned amid consumer groups' complaints about the transaction. The public will have a chance to comment at the hearing.
"We view DMHC's role as especially critical at this juncture with the confluence of Blue Shield's proposed acquisition, the withdrawal of its state tax-exempt status by the Franchise Tax Board, and the concerns we have previously expressed about Blue Shield's surplus growth," four consumer groups wrote in a letter last month to state officials, reported the Los Angeles Times.
Back in March, Blue Shield refused to disclose how much it will spend to acquire Care1st after the California Franchise Tax Board revoked the insurer's tax-exempt status. At the time, Blue Shield's surplus at the end of 2014 was $4.2 billion--more than four times what Blue Cross Blue Shield requires member insurers to hold to cover future claims.
Based on emerging details of Blue Shield's operations, the hearing is good news, as it "looks like a bad deal for the public," suggested former Director of Public Policy Michael Johnson.
Currently, Blue Shield proposes to spend $1.25 billion of nonprofit assets that belong to the community to purchase Care1st and has yet to divulge how the deal would best serve the public, Johnson said. Unless Blue Shield can explain just how Californianas could benefit from the deal, it should be rejected.
In response to the scheduled hearing, Blue Shield "welcomes the opportunity to share how the acquisition of Care1st furthers our mission by serving Medi-Cal beneficiaries, and to answer any questions that the DMHC may have," spokesman Steve Shivinsky told the LA Times.