Washington Blues plan loses its bid to go for-profit

The rejection is one more sign that state regulators appear to be getting tougher on the corporate activities of health plans.

By Robert Kazel, AMNews staff. Aug. 2, 2004.

The era of a nonprofit Blue Cross Blue Shield plan trying to convert to a for-profit company appears to be over, now that a state regulator has rejected an application by the only Blues plan still seeking conversion.

Washington state insurance commissioner Mike Kreidler on July 15 denied such a request by Premera Blue Cross, the largest commercial insurer in the state. Kreidler said a conversion could lead to higher patient premiums and lower physician reimbursements, or both.

Premera had sought conversion for nearly two years and spent about $35 million on the attempt. It had the right to appeal Kreidler's decision to a state court within 30 days of the decision, but had not yet announced its plans at press time. Regulators in Alaska were to make a separate decision on Premera's conversion later in July, because the company has members there, but permission from both states was needed.

The failure of the Mountainlake Terrace, Wash.-based plan to obtain the state's approval represented the apparent defeat of the last remaining active conversion application pending among Blues plans nationwide. It also caps a recent trend of other states rejecting their Blues plans' attempts to convert to for-profit companies.

For-profit plans operate in at least 14 states and Puerto Rico, and cover more than one-quarter of the 88 million members enrolled in Blues plans, according to figures from the Chicago-based BlueCross BlueShield Assn.

But the slowing of Blues conversions, some observers say, could indicate a continued surge in activism by state regulators and the gradual diminishing of an obvious source of expansion for large national payers.