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Calif. Blue Shield Converts Unit To Nonprofit Status

By Staff Writer

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NU Online News Service, Sept. 2, 2004, 6:03 p.m. EDT

California is letting Blue Shield of California, San Francisco, become more charitable.[@@]

Many nonprofit health insurers have been asking state legislatures in recent years to let them convert nonprofit units or their entire organizations into for-profit enterprises.

California Blue Shield, which competes vigorously with the state’s Blue Cross company, has taken a different route and asked the state to let it convert a for-profit unit, Blue Shield of California Life and Health Insurance Company, into a nonprofit corporation.

California Gov. Arnold Schwarzenegger, a Republican, has responded by signing a conversion bill, Assembly Bill 1955, that was sponsored by Assemblyman Juan Vargas, D-San Diego.

The new law based on the bill will let California Blue Shield’s insurance company unit continue to operate under the same insurance company license.

California Blue Shield notes that it started the for-profit insurance company unit years ago because state law previously permitted organizations to sell insurance in California only through licensed, for-profit companies.

The insurance company unit will have to continue to pay the same taxes and meet the same surplus, reserve and market conduct requirements, California Blue Shield says.

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