Who owns a nonprofit?

Who "owns" a nonprofit? In the world of nonprofits, there's been a lot of talk about nonprofit entrepreneurs and taking a business-like approach to nonprofit management. That's all well and good, because a nonprofit can't survive forever on the passionate dreams of the founder, no matter how well-intentioned.

But, a nonprofit is not a business, even though some sure do feel that way. Think about the University of Pennsylvania or Temple University, both major employers with huge assets in land and buildings.  Independence Blue Cross and Highmark Inc., the state's two biggest insurers are nonprofit (although with huge for-profit subsidiaries). But businesses are owned by their founders or shareholders.

Who owns these huge nonprofit entities?

The answer, in part, is that you do. When a nonprofit pays no taxes, its share of the burden of governance, from defense spending to snow removal, falls on the other people that do. In effect, you, the taxpayer, have a stake in that nonprofit. And if the nonprofit is "acquired" by another entity, all that value of unpaid taxes and government services represents the return on investment that you have made simply by paying taxes. That's why it matters how a nonprofit is "valued" and where payment for that value goes.

When nonprofit hospitals, for example, are sold to for-profit hospital chains, it's called a conversion and the chains pay the communities for their longterm support by establishing charitable foundations. That's what Attorney General Beau Biden wanted to do in Delaware. Click here to read my article about this in Friday's Philadelphia Inquirer. Highmark Inc. in Pittsburgh, one of the nation's largest health insurers, wants to "affiliate" with Blue Cross and Blue Shield of Delaware, which has to be one of the nation's smallest insurers. Highmark says that Delaware's Blue would operate as an independent subsidiary, sharing some back office and IT efficiencies.  

Biden opined that even though Highmark, a nonprofit, would be taking over another nonprofit, the change in control amounted to a conversion. Delaware's Blue would lose some control of its assets while Highmark would gain control. Biden's job would be to set a "value" for Delaware's Blue, which would be paid into a foundation to help Delaware's uninsured.

As it turned out, Biden's idea was scotched by the legislature who took other measures to protect the assets of Delaware's Blue. Both Biden and the legislature, while disagreeing about the method, seem to be interested in retaining the "value" of Delaware's Blue in the state.   

Both Highmark and Delaware Blue Cross Blue Shield have sections of their websites devoted to this affiliation. Click here for Highmark's and here for Delaware Blue Cross Blue Shield. Here is a link to a transcript of a public hearing at which the chief executives of both companies explain their reasoning for the merger. Here is another link to the Delaware Insurance Department's website where many papers pertaining to the proposed affiliation have been filed. It will be up to the insurance commissioner to decide whether to allow the deal.