Washington state regulators last week officially blocked Premera Blue Cross' attempt to convert to for-profit status, a decision that could throw a wrench into the fast-consolidating Blue Cross and Blue Shield industry.
State Insurance Commissioner Mike Kreidler nixed Mountlake Terrace, Wash-based Premera's two-year bid to shed its not-for-profit status, saying he feared it would result in rate increases and make the 1.3 million-member insurer a takeover target.
"I believe that for-profit status brings with it a high likelihood that Premera would be acquired by a national insurer" such as Anthem or WellPoint Health Networks, which are now merging into the country's biggest health insurance company with 28 million members, Kreidler said in a news release.
The decision followed two rounds of public meetings and an 11-day hearing in May, during which providers and consumer groups vocally opposed the conversion. Regulators in Alaska, where Premera covers 110,000 members, still plan to issue their decision July 25, even though the conversion cannot proceed without approval from both states.
Premera is the third Blues plan to have its conversion plans denied in just over a year. State regulators blocked conversion attempts by CareFirst, Owings Mills, Md., in March 2003 and by Blue Cross and Blue Shield of Kansas in August 2003. Soon after, Blue Cross and Blue Shield of North Carolina and Horizon Blue Cross and Blue Shield of New Jersey scrapped their plans to convert.
The backlash is largely the result of the Blues' improved financial picture, industry observers say. While money-losing Blues plans once sought to convert primarily to help stave off bankruptcy, now Blues are posting record profits, and consumers, regulators and legislators have begun to question whether conversions are necessary.
Premera said it was still reviewing the ruling. "On preliminary review, it appears to us that the decision is not consistent with testimony at the hearing and not consistent with the requirements of state law," Yori Milo, Premera's chief legal and public policy officer, said in a news release.