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Blue Cross Says It Will Donate $100 Million : Health care: Under pressure from the state, the insurer takes the action to mitigate its partial shift to for-profit status.

May 27, 1994|DAVID R. OLMOS | TIMES STAFF WRITER

Blue Cross of California, responding to pressure from the state to boost its charitable spending, said it will donate $100 million this year to health care charities that include poison control centers, emergency room services and children's hospitals.

The announcement resulted from ongoing talks between the California Department of Corporations and Blue Cross over the insurer's charitable responsibilities following a major restructuring last year that created a for-profit unit of the tax-exempt, nonprofit company.

Earlier this month, Blue Cross said it would donate 22.5% of its ownership stake in its for-profit managed-care company, WellPoint Health Networks, to a nonprofit foundation.

Blue Cross' moves come after Gary Mendoza, the Department of Corporations commissioner, told the company it needed to boost its charitable donations. On Thursday, Mendoza said he was "pleased and encouraged" by Blue Cross' decision, calling it "an important interim commitment while the company works to create a long-term public benefit plan."

Blue Cross raised $517 million when it sold a nearly 20% stake in WellPoint in an initial public stock offering in January, 1993. At the time, the nonprofit Blue Cross shifted most of its private health care operations into WellPoint, a subsidiary that includes the CaliforniaCare health maintenance organization and other health plans.

Blue Cross in August agreed to pay $100 million to statewide charity over 20 years, or about $5 million a year. But that action drew criticism from some state legislators and consumer advocates, who contended that the insurer was shirking its legal duties.

Following Blue Cross' decision to shift some of its operations to for-profit status, the state began talks with the company over its charitable payments. As an organization that continues to have tax-exempt status, the state argued, Blue Cross is obliged to compensate Californians for the total value of its assets, including its 80% stake in WellPoint.

Blue Cross' announcement Thursday involves an additional $100-million payment to a number of health programs. The insurer said it has earmarked $25 million of that total to specific groups and will announce in September the recipients of the other $75 million.

But Harry Snyder, co-director of the Consumers Union in San Francisco, said Blue Cross' proposals are still inadequate compensation for Californians. "This is the same high-handed conduct from Blue Cross. I don't think it's enough and I don't think they've gone through the right process."

Blue Cross' pledges include $10 million to help support hospital emergency rooms, $5 million for state poison control centers and $5 million to fund health care for the uninsured at children's hospitals in Los Angeles, Orange County, Oakland, San Diego and Fresno.

It also pledged $1 million each to the California affiliates of the American Cancer Society, American Heart Assn., American Lung Assn., March of Dimes Birth Defects Foundation and the Pediatric Aids Foundation.

Rita Moya, president of the National Health Foundation, a Los Angeles-based charitable group, said the donations will have a "tremendous impact" on helping keep the state's hospital emergency rooms and trauma centers open. Such operations typically suffer significant losses when they treat uninsured patients.

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