For-profit pursuit

Published 9:00 pm Saturday, August 5, 2006

MOUNTLAKE TERRACE – Gubby Barlow arrived at Premera Blue Cross in 1997, a time when the medical insurer was losing money and subscribers.

Now, Premera is solidly the largest insurer based in Washington, with nearly 1.6 million members in four states. It’s also been on sound financial footing again in recent years.

Last year, the nonprofit company recorded net income of nearly $91 million, bringing Premera’s reserves up to $603 million.

Barlow, the company’s chief executive officer and president, spearheaded Premera’s effort to transform itself into a publicly held, for-profit company. Earlier this year, the state Court of Appeals backed Insurance Commissioner Mike Kreidler’s 2004 rejection of the proposed conversion. The company last month requested a review of the decision from the state Supreme Court.

No matter how that turns out, however, Barlow said Premera is honing its services to provide “better health for our members at sustainable costs.”

The Mountlake Terrace-based insurer has attacked that goal from several fronts, which include offering a wider choice of customized individual health plans, and studying and publicizing shortfalls in Medicare and Medicaid funding.

Barlow recently sat down with The Herald in his office to talk about Premera’s priorities and challenges.

Question: Why is Premera pursuing its request to convert from a private nonprofit company into an investor-held, for-profit corporation?

Answer: “It’s still important to have the maximum capital flexibility for the long term. For the short term, we’ve done fine and we’ll do fine for the foreseeable future. … Going public is just one of the strategies for going forward.

“The company is in the best shape it’s been in ever, I believe. But that doesn’t mean that we couldn’t face challenging times again, and we would be shut out of opportunities in the future that we could have had if we were public. Capital flexibility is important for any company.”

Question: Premera recently released an independent study claiming that Washington employers paid more than $1 billion in 2004 to cover shortfalls incurred by hospitals and doctors serving Medicare and Medicaid patients. What’s do you think is the answer?

Answer: “The cost-shifting problem requires help from all. What we have across the nation is a hidden tax. The government is underfunding its problems and doctors and hospitals have to shift that to insured customers.

“I’ve been quite surprised at how much interest there’s been in this study. No one else had done it in a dollar-and-cents way. Hopefully, our study is going to be that catalyst. It’s going to be a vital topic as the baby boomers go into Medicare.”

Question: Where else is Premera focusing efforts to keep down costs and improve health care quality?

Answer: “Supporting quality shouldn’t just focus on those who are ill, but also those who are healthy. We want to help our members to improve their wellness.

“We know from national studies that for those with high-risk factors, it costs about three times more than those with low-risk factors.

“It’s been an evolution. With HMOs, the original concept was exactly that, to maintain health of the healthy. It’s not a new concept, but I think it’s gaining traction. The evolution that we’re in now is to focus on high users and not restrict the healthy, normal users.”

Question: What’s the biggest challenge you see ahead for Premera?

Answer: “The current state of health care is in a vicious circle of double-digit rate increases and evidence of declining health. … What people really notice are the cost increases.”

“We shouldn’t just accept that costs are going to increase. The track we’re on, they’re going to increase. But we can use incentives and other programs to decrease costs.”

Question: With rising costs, some have suggested taking another look at a nationalized, single-payer plan for the U.S. What do you think?

Answer: “The single-payer approach is a one-size-fits-all. I think we’re a nation that enjoys choice.”

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