Doctor Calls Kaiser a False Nonprofit | Courthouse News Service
Saturday, December 2, 2023
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Doctor Calls Kaiser a False Nonprofit

LOS ANGELES (CN) - A doctor wants California's tax board to collect eight years' worth of insurance taxes from Kaiser, alleging Kaiser has hoarded money by claiming it is not an insurer and is a nonprofit, in Los Angeles superior court.

Representing himself and other California citizens and taxpayers, Dr. Michael Myers brought a petition for a writ of mandamus against the State Board of Equalization; Dave Jones, Insurance Commissioner of the State of California; and Betty T. Yee, Controller of the State of California; with Kaiser Foundation Health Plan, Inc., as real party in interest.

Myers wants the respondents to do their jobs collecting taxes from Kaiser.

As an insurer, Kaiser should pay a gross premium tax (GPT), which is designed to approximate the volume of business done in the state, and thus the extent to which insurers have availed themselves of the privilege of doing business in California," Meyer's complaint states.

Kaiser is the largest health care plan in the State of California, collecting over $38 billion in annual premiums to provide health care coverage for over 7 million people, according to Myers. Under law, it should pay 2.35 percent of the premiums into California's coffers, he says.

But Kaiser has never filed required gross premium tax returns, up to the time the lawsuit was filed, and is liable for eight years of past-due payments, interest and penalties, Myers claims.

Respondent State Board of Equalization has not assessed the taxes, the commissioner has not demanded the tax returns be filed, and the controller has not notified the commissioner that Kaiser is delinquent in paying the tax, or filed suit against the healthcare giant, to collect, he claims.

"Although it is currently considered a 401(c)(3) charitable organization, as of June 15 this year Kaiser has collected well over $21 billion more in assets than it is required to keep in its reserves. Yet Kaiser pays no California state income tax or federal income tax," the complaint states.

The complaint continues, while it was supposed to be charitable and earned billions, "instead of providing premium discounts to its members/subscribers or decreasing its income-generating coinsurance, fees, and deductible charges imposed on its members, Kaiser instead continues to accumulate and hoard unreasonable excess [reserve] amounts. Furthermore, Kaiser bestows a largess on its high level executives with non-compliant pension plans and even funds a non-compliant pension plan for physicians employed by the medical groups contracted with Kaiser to treat Kaiser members. Those physicians are not employees of Kaiser and the medical groups are ostensibly independent, for-profit corporations whose only relationship with Kaiser is contractual. Nevertheless, Kaiser currently has a $6 billion pension liability for those purportedly independent physicians. If that is not enough, Kaiser contractually indemnifies those medical groups at Kaiser Foundation Hospitals, another purportedly independent charitable corporation, with respect to their respective professional liability. Kaiser maintains the above-described professional liability insurance, its general liability insurance, and other executive perquisites mostly through self-insurance and two subsidiary captive insurers it caused to be domiciled in Bermuda, outside of regulatory jurisdiction of the [appropriate U.S. federal agency]. The excessive reserves, lavish executive salaries, generous pension funds, and provision of liability insurance to the independent physicians and hospitals that provide care to Kaiser's members are evidence of the tremendous economic benefit Kaiser has received as a result of unlawfully avoiding the GPT (gross premium tax)." (Parenthesis added.)

Only insurers are to pay the tax, and Kaiser claims to be a healthcare service plan and Health Maintenance Organization, and not an insurer, according to the complaint.

But "whether a company is an 'insurer' for purpose of the gross premium tax is determined by what the company does, not what it calls itself," the complaint states, after citing precedent.

"It is well settled that health care service plans such as Kaiser are 'engaged in the business of insurance,'" according to a California Court of Appeals, Myers says.

Also, the United States Supreme Court has found that "an HMO provides healthcare, and it does so as an insurer" Myers says, citing precedent.

The gross premium tax is based on the premiums that Kaiser collects "from its members in exchange for providing indemnity for future contingent medical costs attributable to those members."

Myers is represented by Timothy J. Morris of Gianelli & Morris in Los Angeles, Richard J. Ayoob of Ajalat, Polleu Ayoob & Matarese in Glendale, and Jerry Flanagan and Pam Pressley of Consumer Watchdog in Santa Monica.

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