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home / healthcare / press releases

NEWS RELEASE
Nov 23, 2004


CONTACT: Jamie Court - 310-392-0522 x327

CA Taxpayers Sue To Force Wellpoint/Blue Cross To Pay $500 Million In Unpaid Taxes

Los Angeles, CA -- The Foundation for Taxpayer and Consumer Rights has filed a taxpayer lawsuit on behalf of all California taxpayers calling upon California Controller Steve Wesley and the Board of Equalization to collect hundreds of millions of dollars in gross premiums taxes unpaid by Wellpoint subsidiary Blue Cross of California during the last eight years. The complaint can be read at: http://www.consumerwatchdog.org/assets/scans/WellpointComplaint.pdf

Every other for-profit Preferred Provider Organization (PPO) insurance plan in the state pays gross premiums taxes on insurance products as specified by the California Constitution. The lawsuit alleges Wellpoint and Blue Cross have evaded the gross premiums tax, illegally opting to pay a far lower corporate income tax rate, and have shorted California $65 million in 2003 alone.

Article III, Section 28 of the California Constitution requires all insurers doing business in the State of California to pay tax based upon gross premiums received. The gross premium tax is 2.35% of an insurer's annual gross premiums and is in lieu of most other taxes and licenses.

"In these times of severe budget shortfalls (projected to be $6 billion in 2004-05 and growing to an $8 billion gap in 2005-06) and deepening reductions in funding for education and health care, among other public programs, Defendants must be ordered to carry out their Constitutionally-mandated duties to assess and collect the gross premium taxes owed by Blue Cross to the State of California," the complaint states. "California citizens and taxpayers have a substantial right and interest in requiring these outstanding taxes to be collected for the benefit of funding the myriad public programs that are deeply under-funded at present."

"By failing to pay the gross premium tax, Blue Cross is operating at a unique and unfair competitive advantage to other for-profit entities that are required to pay gross premium taxes on their PPO products," according to the complaint. "Accordingly, the relief sought by this Complaint will level the playing field for all California health insurers and result in a more competitive and fair environment for health care insurers. As a result of this action, Blue Cross will be treated under the tax laws of California the same as every other for-profit California health insurer that sells a PPO product and pays gross premium taxes thereon. Blue Cross will pay gross premium tax on its PPO business and franchise tax on its non-indemnity products."

Jordan L. Lurie of the law firm of Weiss & Lurie joins with Harvey Rosenfield and Pam Pressley of FTCR as the attorneys representing the taxpayers.

FTCR is a nonprofit, nonpartisan consumer watchdog group. For more information visit www.consumerwatchdog.org



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