Another Blue Cross plan loses for-profit bid

Premera request denied in state of Washington

July 16, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

In another defeat for a Blue Cross plan seeking to switch to for-profit operation, the insurance commissioner in the state of Washington yesterday rejected a for-profit conversion proposed by Premera Blue Cross.

Maryland's CareFirst BlueCross BlueShield had its controversial plan to become a for-profit blocked 16 months ago.

Since then, the Kansas Supreme Court upheld that state's earlier rejection of a conversion, Blue Cross and Blue Shield of North Carolina withdrew its conversion application, and Horizon Blue Cross and Blue Shield of New Jersey announced it was dropping its exploration of conversion.

"Kansas got the ball rolling, Maryland really picked it up and ran with it, and now Washington followed their lead," said Dawn Touzin, of the Boston-based group Community Catalyst, which works with local groups where conversions are being considered.

With the latest rejection of a conversion, Touzin said, "Anybody in the future who wants to try one has some pretty serious questions to overcome."

Douglas Sherlock, of Sherlock Co., a health data and consulting firm in Gwynedd, Pa., agreed with Touzin that the momentum for Blues plans to turn for-profit had stopped, at least for now. Conversions were first permitted a decade ago, and more than a dozen states now have for-profit Blues.

"Insurance commissioners have become more aggressive," Sherlock said. "They are looking at these companies differently."

But Joy Grossman, associate director of the Center for Studying Health System Change, said there could be conversions in the future as market conditions and state political climates change.

In yesterday's decision, Washington Insurance Commissioner Mike Kreidler concluded after a two-year review that Premera's conversion could create "an unacceptable risk for excessive rate increases," particularly in eastern Washington, where Premera dominates the market.

He also said a local company would best serve the public, but "for-profit status brings with it a high likelihood that Premera would be acquired by a national insurer."

Also, while Premera proposed to give all its stock to a nonprofit foundation, Kreidler concluded that limits on the foundation's right to hold and vote the stock meant the public wouldn't get fair value in exchange for losing the nonprofit insurer. Premera had argued that the limits on the foundation were required by the national Blue Cross and Blue Shield Association.

While saying Kreidler's order is still being studied, Yori Milo, executive vice president of the insurer, said, "On preliminary review, it appears to us that the decision is not consistent with testimony at the hearing and not consistent with the requirements of state law."

Premera has 30 days to appeal the decision in court.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.