Lawsuit challenges state ruling over charitable assets of nonprofit health providers

When WellPoint Health Networks planned to buy up what was then known as Blue Cross two dozen years ago, California regulators required WellPoint to set aside billions of dollars to keep much of the nonprofit’s assets in the public trust. The $3 billion carve-out from the Blue Cross acquisition seeded what became the California Endowment and the California Health Care Foundation, major charities that now promote an array of services across the state. Now a lawsuit is accusing the same state regulatory agency of failing to safeguard the public trust in two more recent decisions. The California Department of Managed Health Care ruled in 2015 that Blue Shield of California’s proposed acquisition of Care1st, a smaller for-profit provider, did not trigger a stricter regulatory review because the nonprofit had no assets subject to charitable trust obligations.