MOUNTLAKE TERRACE – A trio of consultants hired by the state insurance commissioner have recommended against Premera Blue Cross’ proposal to become a for-profit company, although the insurer maintains the change would benefit consumers.
The reports by those consultants also said it’s not clear that Premera’s proposed change from a nonprofit to a for-profit company would raise premiums for consumers or lower reimbursement payments to doctors.
That’s been a central issue of contention between Premera and a coalition of health care groups opposing the insurer’s transformation.
“It’s one of the key questions in this: Will this impact rates? The evidence isn’t there supporting that happening,” said Scott Forslund, a spokesman at Premera’s headquarters in Mountlake Terrace.
Founded 58 years ago, Premera is the state’s largest health insurer and one of Snohomish County’s biggest employers. Its executives say that becoming a for-profit company with shareholders will help it raise capital to improve the insurer’s services and technology. The conversion requires approval from the insurance commissioner and the state attorney general.
But members of the Premera Watch Coalition point out the consultants’ warnings that Premera might raise premiums in order to satisfy the expectations of its investors.
“These reports confirm what we have been saying all along – Premera’s conversion is a bad deal,” said Barbara Barron Flye, executive director of Washington Citizen Action. “Premera should withdraw its plan and stay a nonprofit.”
The consultants’ reports, released last week by Insurance Commissioner Mike Kreidler, looked at various aspects of the proposed conversion plan. Given particular attention is Premera’s pledge to put all of the company’s initially issued stock into a public health foundation for Washington and Alaska.
While the reports were mixed in judging the actual effect of Premera’s conversion, the three firms took a similar stance in the end.
“Given the current and projected financial position of Premera, it is not likely that the conversion to a for-profit company will provide both maximum value to the public through the establishment of a foundation and protection of the members and providers that do business with the company,” a report by PricewaterhouseCoopers concluded.
The New York-based Blackstone Group LP summed up that the plan may not be “fair to the public from a financial point of view.” Cantilo &Bennett LLP of Austin, Texas, wrote that it “cannot recommend its approval.”
The reports came on the heels of a letter to Premera from the state assistant attorney general Robert Fallis, who said the transaction, as proposed, may not pass muster. His letter followed an earlier one by the state’s deputy insurance commissioner, who said the proposal may need significant changes in order to succeed.
Fallis and some of the consultants raised questions as to whether Premera’s full fair-market value will transferred into the new foundation, as required by law.
The proposed foundation, which could provide millions of dollars for health care programs in Washington and Alaska, would receive shares in the new publicly traded Premera. But restrictions on those shares, including limits on when and how many shares the foundation could sell, may lessen their value, Fallis wrote.
In addition to the reports prepared by the consultants for the insurance commissioner, Premera has released reports written by consultants it hired. Those reports, which also will be considered by Kreidler’s office, take a more positive view of the conversion plan.
“We believe that we have made an excellent proposal and that it should be approved,” said Premera’s chief executive officer, H.R. Brereton “Gubby” Barlow, last week. He said Premera’s consultants responded well to issues brought up by the insurance commissioner’s team.
A final round of public hearings on the conversion proposal kicks off this week. The nearest hearing will be 6-8 p.m. Dec. 11 at the DoubleTree Hotel, 18740 Pacific Highway S. in SeaTac. Hearings also are scheduled for Yakima, Spokane and Bellingham.
After the public hearings, Premera and its opposition will make their cases at a formal hearing in January. The insurance commissioner is scheduled to make his recommendation on the conversion by March 15.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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