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Washington State rejects health insurer’s bid to become for-profit

Thursday, July 15, 2004
Scott Benbow: 415-431-6747

Washington Insurance Commissioner Rejects Premera
Blue Cross Conversion Proposal, Protects Consumers
Decision on Premera Conversion in Alaska expected next week

SEATTLE, WA – Washington State Insurance Commissioner Mike Kreidler today rejected a proposal by nonprofit Premera Blue Cross to convert to a for-profit corporation. After a painstaking two-year analysis of Premera’s proposal, Commissioner Kreidler concluded that a for-profit Premera would not be in the best interests of consumers. A decision by Alaska’s Insurance Commissioner on Premera’s proposal to convert to a for-profit corporation in that state is expected next week.
Commissioner Kreidler convened an exhaustive 11-day adjudicative proceeding in May and took testimony from Premera, interested interveners from Washington and Alaska, and his own staff, as well as experts representing all sides. Consumers Union staff testified as a witness for interveners that represent consumer interests in the state.
“This is a far-reaching, precedent-setting, and tremendous victory for consumers in Washington,” said Scott Benbow, attorney with Consumers Union. “We applaud the Insurance Commissioner’s efforts to make this process as open as possible and to carefully consider its impact on consumers.”
In a 58-page Final Order, Commissioner Kreidler concluded that the public interest would not be served if Premera converted because:
•While Premera testified that local management would best serve Washington subscribers, “for-profit status brings with it a high likelihood that Premera would be acquired by a national insurer”;
•A for-profit Premera’s investor-driven goals would put the public at an unacceptable risk for excessive rate increases; and
•While state law requires Premera to transfer the fair-market value of the company’s assets to a nonprofit organization, Premera’s characterization of this required transfer as a “voluntary gift” does not comply with state law.
“Kreidler’s decision is part of a growing trend around the country that is helping to stem the tide of the conversion of nonprofit health insurers to for-profit companies,” said Benbow. “Kreidler joins insurance commissioners in Kansas and Maryland who also concluded that a Blue Cross conversion was not in the public interest.”