February 24, 2009 in City

Premera gives up on startup in Arizona

Insurance subsidiary has lost $30 million
By The Spokesman-Review
 

Premera Blue Cross is selling its startup Arizona health insurance subsidiary amid mounting cash losses and an inability to gain a foothold in the competitive Southwest market.

“We had hoped to build a strong health insurance plan,” said spokeswoman Jodi Coffey, “but we couldn’t build it quickly enough to be viable.”

She said LifeWise Health plan of Arizona lost $30 million since it began selling coverage five years ago. In the past two years the number of customers has fallen by half to 16,000.

The poor performance, along with the national recession, massive investment losses and grim insurance outlook, led to the deal with Blue Cross Blue Shield of Arizona.

The final sales figure depends upon how many LifeWise customers decide to enroll with Blue Cross Blue Shield.

Premera, one of Washington’s big three private health insurers with large operations in the Spokane region, caused controversy by pouring $49 million into its Arizona subsidiary since 2004.

Critics claimed the money came from surplus funds collected by overcharging its Washington customers. Insurance Commissioner Mike Kreidler last year restricted further Premera expenditures in Arizona to $12 million, said Stephanie Marquis, an insurance commission spokeswoman.

Premera, a nonprofit company with headquarters in the Seattle area, has defended using its surplus fund for new business ventures as prudent investments that can one day provide financial benefits for the parent company and its customers.

Coffey pointed to LifeWise of Oregon, saying that the subsidiary has earned $55 million during its 15 years.

She said the Arizona company will close its offices in Scottsdale and Tucson, offer severance to its 40 employees and provide job hunting assistance.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email