Business
Premera Blues appeals for-profit conversion denial
■ The insurer is arguing that the Washington state insurance commissioner ignored potential benefits outlined in its application.
By Robert Kazel — Posted Sept. 6, 2004
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Premera Blue Cross' request to convert to a for-profit company was declared dead by regulators in its home state of Washington. But the company is taking its case before a state court to get a second opinion.
Mountainlake Terrace, Wash.-based Premera asked a judge in August to overturn Insurance Commissioner Mike Kreidler's July 15 denial of its conversion application. A conversion, Kreidler had concluded, could raise premiums for some patients and might pave the way for an acquisition by a big out-of-state insurer.
Premera's lawyers argued that Kreidler ignored many potential benefits of a conversion, such as the planned creation of two large nonprofit health care foundations using money from the initial public stock offering. Premera has more than 800,000 fully insured members in Washington and about 100,000 in Alaska.
In the nearly two years since the Blues plan filed for permission to trade stock, it has spent about $35 million making its case. An appeal could take several more months, said Scott Forslund, Premera spokesman.
In the appeal, Premera's lawyers complain that Kreidler "belittled" the company's assertion that it needs to bolster capital accumulation through stock sales to compete with out-of-state, for-profit insurers. Kreidler, through a spokesman, declined to comment.
The Premera appeal "strikes us as one more sacrifice of common sense on the altar of due process," said Tom Curry, executive director of the Washington State Medical Assn., which has fought the conversion. The association continues to believe that conversion would be bad for patients and would lead to cuts in doctors' reimbursements, he said.
A conversion application filed by Premera with the Alaska Dept. of Insurance was rejected late in July by Insurance Director Linda Hall, who called the proposal "unfair and unreasonable." Hall did, however, outline changes Premera could make that might change her mind.
The company needs the approval of both states to convert.