MOUNTLAKE TERRACE – Days after Premera Blue Cross ended a nearly five-year quest to become an investor-owned, for-profit corporation, the insurer’s chief executive officer happily talks about the future.
Even without converting to a publicly owned company and tapping into the capital markets, the company is in a strong financial position.
“We’ve had a very good 2006. Our operating income improved again, which is a key figure for us,” said Chief Executive Officer Gubby Barlow, who’s marking his 10th year at Premera this month.
Specifically, Mountlake Terrace-based Premera recorded an operating income of about $96 million last year – a margin of 3 percent for the year. The company’s net worth also grew.
Contrast that to the insurance firm’s condition when Barlow first joined the company a decade ago. It was in its fourth year of operating at a loss, and its membership was much smaller.
Between 1999 and 2005 alone, Barlow said, Premera’s subscriber numbers grew by 50 percent. The company insures more than 1.6 million people in four states.
Premera also has strived to offer a variety of new plans and services to meet the quickly changing health insurance market.
Cassie Sauer, spokeswoman for the Washington State Hospital Association, said Premera deserves credit for continuing to transform itself even as it pursued conversion into a for-profit company.
The state hospital association was among those representing medical care providers and consumers that lined up against Premera’s conversion. After Premera announced its intentions in 2002, the association filed a lawsuit a year later in an attempt to block the move.
That lawsuit was dropped last week, a key in Premera’s decision to remain as a privately held nonprofit.
In other states, a number of insurers affiliated with Blue Cross and Blue Shield have converted into investor-held, for profit companies. Premera argued that doing the same would give it access to more capital to improve the company’s technology and customer service.
But the state’s insurance commissioner, Mike Kreidler, denied Premera’s application to convert in 2004. That decision was upheld by the state Court of Appeals, prompting Premera to appeal to the state’s Supreme Court.
While Barlow said the reasons to convert the company were sound in 2002, Premera began to reassess its position last year.
“There was a lot of water under the bridge,” he said. “So we wanted to reassess whether we were on the right path with all the changes in health care that have taken place.
“We listened, and we decided that, in the right circumstances, we would drop our appeal.”
That led to last week’s announcement that Premera would do just that.
Sauer said the hospital association was happy to drop its lawsuit once Premera changed course.
“It has truthfully been a wedge issue between Premera and a lot of medical providers,” she said. “We actually have a lot in common.”
Moving forward, Premera is focused on three pillars: improving its own efficiency, better managing the 5 percent of members who drive more than half of the insurers’ costs and helping members maintain their health.
“We have twin goals of more sustainable costs and better health for our members,” Barlow said.
To improve efficiency, Premera is borrowing from Toyota’s much-admired strategies. That shouldn’t lead to layoffs among Premera’s 2,500 or so employees in Mountlake Terrace, however. Most efficiency can come through natural attrition among the work force, Barlow said.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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