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The Facts Are Clear: Blue Shield is Dedicated to Fixing the Healthcare System

BY PAUL MARKOVICH – Despite much progress in recent years, our healthcare system still faces many challenges. Medical costs are rising at unsustainable rates, pharmaceutical prices are skyrocketing, programs for the poor are underfunded and millions of Californians still lack basic coverage. Many consumers are having trouble paying their deductibles.

For many years, Blue Shield of California has attempted to address these issues by strongly advocating for coverage for all, funding a large foundation to help community clinics and domestic violence prevention programs and limiting our net income to 2 percent of revenue, returning anything more to our customers and the community. We have also been a national leader in developing coordinated care systems with doctors and hospitals that are improving quality and reducing costs. In October, we completed the acquisition of Care1st Health Plan so that we can serve Medi-Cal patients for the first time and fulfill our nonprofit mission to ensure that all Californians have access to high-quality health care at an affordable price.

Unfortunately, a few organizations have chosen to ignore our longstanding record of health reform leadership and distract from the larger goal of fixing the healthcare system.

Historically, the Department of Managed Health Care (DMHC) has reviewed health plan acquisitions and required contributions of just over 2 percent of the purchase price to charity. This is based on the contributions that DMHC required of UnitedHealthcare when it acquired Pacificare in 2005 and Anthem’s acquisition of Wellpoint in 2004. By that precedent, Blue Shield would have been asked to contribute about $25 million to improve access and quality of care. In our final agreement, Blue Shield committed $200 million – or more than 13 percent of the purchase price. This includes $60 million on projects to enhance provider directories, Medi-Cal data reporting and consumer services and $140 million earmarked as a minimum contribution to the Blue Shield of California Foundation.

There are those that say the $140 million commitment was intended to supplement Blue Shield’s annual contribution to our foundation; however, that was never the case, as the language in the final agreement makes clear: “For ten years following the close of this transaction, Blue Shield agrees to make annual contributions of not less than $14 million per year to the Blue Shield Foundation” or a similar charitable organization.

In the past five years, Blue Shield has donated an average of 15 percent of the company’s pre-tax income – more than $30 million per year – to the Foundation, and we intend to continue that practice. Prior to this agreement, there was no guaranteed minimum contribution.

Attempting to insert ambiguity and controversy into an agreement that contains neither is both unfair to Blue Shield and a distraction from our true purpose: creating a healthcare system that is worthy of our family and friends and sustainably affordable for everyone. Rest assured that Blue Shield will honor the promises we’ve made in our agreement with the DMHC and we look forward to our mission-driven work in the New Year and beyond.

Paul Markovich is president and CEO at Blue Shield of California


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