Premera for-profit decision due in July

Published 9:00 pm Thursday, April 29, 2004

MOUNTLAKE TERRACE — Premera Blue Cross, a nonprofit corporation that wants to transform into a for-profit insurer, will finally make its formal case to the state insurance commissioner next week.

The final hearing, which will be presided over by Insurance Commissioner Mike Kreidler, begins at 9 a.m. Monday in Tumwater. After receiving testimony from Premera, from advisers to the state insurance office and from opponents of the conversion, Kreidler will make a decision by July 19.

So far, the conversion application process has spanned nearly two years, produced more than 40,000 pages of documents and cost millions of dollars for consultants and attorneys.

The basic arguments for and against the conversion revolve around one issue: Will it be good for the health care insurer’s customers?

Mountlake Terrace-based Premera contends that the conversion would help the company raise money to invest in technology and patient services. As a public company, Premera could also gain access to capital faster than a nonprofit, executives say.

"This is a good proposal. It’s one that will give this company the resources in the long term to serve its customers well, and at the same time create a unique opportunity to fund health care needs in Washington and Alaska at an unprecedented level," Premera spokesman Scott Forslund said.

His last point refers to Premera’s promise to set up two nonprofit foundations — one in Washington and one in Alaska — if the conversion is approved.

The foundations, which would be funded with 100 percent of Premera’s initial stock, could provide $500 million for public health programs. A representative for the two foundations also would sit on Premera’s board of directors.

Despite that and other pledges, a coalition of groups representing hospitals, doctors and some consumers see the conversion as a bad deal for consumers. As a for-profit company, Premera could raise premiums to satisfy the expectations of its investors, opponents argue.

"Given the evidence and the support of our concerns from the individual experts, we believe this conversion isn’t in the public interest and that Kreidler should issue a denial," said Kyle Tanner of Premera Watch, an advocacy group formed by Washington Citizen Action.

Tanner and other opponents point out a long list of concerns raised in consultants’ reports for the state. Forslund said none of those reports concluded that premiums are certain to rise if the conversion is allowed.

Premera first notified state regulators of its intention to convert into a for-profit company in May 2002. Since filing its application in September of that year, the state’s review and legal arguments over the completeness of the application have dragged out.

As of March, Forslund said, Premera had spent about $31 million on the conversion, including $18 million in expenses billed from the state to the insurer. Under state law, Premera is responsible for reimbursing the state during the process.

Forslund said Premera has been surprised at the cost, which has gone up with the duration and detail of the state review. While costly, he said the amount spent equals only about 1 percent of the company’s annual revenues. He added that the cost is not being passed directly on to consumers through higher premiums.

Tanner said Premera Watch has spent an estimated $100,000 fighting the conversion. Even if Premera’s expenses aren’t passed along in the rates, that money could have been better directed toward health care services, he said.

The one thing the two sides seem to agree on is that Kreidler will carefully weigh the issues when he decides whether to allow Premera’s conversion.

"We feel the insurance commissioner has done an excellent job of keeping the public interest in mind throughout the process. He’s recognized that consumers, hospitals and health care providers have a huge stake in what happens with this conversion," Tanner said.

Premera hasn’t always agreed with Kreidler, but Forslund said he believes the state has done a thorough review of the company’s application.

"We’re confident he will make a fair, well-reasoned decision," he said.

Premera, which insures close to 1 million people, is believed to be Snohomish County’s largest privately held company, and is one of its largest employers.

Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.