Public voices divided over Premera request

By Kyung M. Song
Seattle Times staff reporter

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Premera Blue Cross's for-profit conversion plan is opposed by many Washington doctors and hospitals. Consultants hired by the state have formally concluded that the conversion won't benefit residents.

But at a forum in Seattle yesterday, the public was sharply divided on whether the Mountlake Terrace-based insurer should be allowed to become an investor-owned company.

About 60 people turned out at SeaTac's DoubleTree Hotel for the third of four public hearings convened by Insurance Commissioner Mike Kreidler, who will rule on the nonprofit's conversion application next year. Attendance was much smaller than last week's hearing in Spokane, which drew more than 200 people.

Though more people spoke out against the conversion yesterday, opinions on both sides were equally strong.

Roger Overbeck, president of Titan tire distributor in Ellensburg, denounced Premera's "monopolistic" ways and said insurance buyers will end up subsidizing Premera if the conversion is allowed.

Overbeck's company is one of about 150 independent businesses that jointly buy health coverage through Premera. The group has seen its premiums rise steeply. But the group feels it has little leverage against Premera, which dominates Eastern Washington with about 70 percent of the market.

"They come in and say, 'Take it or leave it,' " Overbeck said.

If Premera were to become a for-profit company, "they'd have to provide dividends for investors and incentives for CEOs," Overbeck said. "Where is that money going to come from? From subscribers."

But Jim Wilson, senior vice president of Marsh insurance-brokerage firm, argued that allowing Premera to convert will enable it to raise money on Wall Street without taking out debt — something that should help keep premiums down, not push them up.

Wilson said anything that helps Premera stay financially strong will benefit its members.

"Whether you are a for-profit or nonprofit, it really doesn't make any difference," he said. "They need long-term capital."

Experts hired by the state to analyze Premera's conversion proposal advised Kreidler last month to reject the plan. They concluded that Premera likely will have to raise premiums to satisfy investors.

They also said Premera's financial performance is weaker than that of its peers and thus it may not fetch its full value when the company sells stock to the public — which could prevent Premera from meeting one of the legal requirements of its conversion.

According to a report by PriceWaterhouseCoopers, one of the state's consultants, Premera over the next five years may have to raise its premiums by 8 to 10 percent above the normal rate of increase in order to meet its post-conversion financial targets.

Premera says analysis by its own outside consultants shows that a for-profit conversion by itself will not raise premiums, lower reimbursement to doctors and hospitals or reduce insurance coverage for patients.

Premera is Washington's largest health insurer and has 28.4 percent of the state's enrollment. On Wednesday, Kreidler granted Premera's motion to push back the deadline for his final ruling from March 15 to give the company more time to make any changes to its conversion application. Kreidler will now make his decision by June 7.

The public will get its final chance to comment Tuesday in Bellingham.

Kyung Song: 206-464-2423 or ksong@seattletimes.com

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