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Spokane, Washington  Est. May 19, 1883

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Insurers share history, business model

editorial

Kaiser Permanente and Group Health Cooperative might be likened to sisters, with similar histories and business models. Both were formed in the mid-1940s, and they share a business model that combines insurance and an in-house network of medical providers.

Leadership of the two insurers say they get along fine: members have been able to use each others facilities for years. But they are not twins, and a 1990s bid to combine the two failed.

California-based Kaiser was never content to stay home, while Group Health stuck to its roots in the Northwest. Kaiser, with 10 million-plus members, has become the second-biggest health insurance company in the United States, with pockets of members along the West Coast, East Coast, Colorado and Hawaii.

Group Health has 590,000 members, including 113,000 in Eastern and Central Washington, and North Idaho. Its four Spokane care facilities employ 507, including 63 doctors.

The cooperative has prospered the last few years, with net income of $131.4 million the first nine months of 2015. Reserves, at $888 million, have increased almost $100 milllion over 2014.

But leadership says improved financials make this a propitious time to find a partner who can provide the additional capital to improve facilities and leverage to hold down drug costs. And Kaiser will create a $1.8 billion foundation focused on improving health care in Washington.

Washington residents have heard these arguments before, in 2002, when Premera sought permission to become a for-profit company able to sell stock and invest the proceeds in new technology, facilities and services while increasing reserves against future losses.

That effort was vehemently opposed by consumers and providers, notably hospitals, who did not see the benefits, and criticized the lucrative stock options that would have gone to executives had the change been approved.

One of the elements in Insurance Commissioner Mike Kreidler’s decision to reject the proposal: As a public company, Premera would become an attractive takeover target for insurers such as Anthem.

That was before passage of the Affordable Care Act, which set off a surge of hospital and provider consolidations that has already reshaped the delivery of health care in the Spokane area.

There is a chance the Kaiser/Group Health deal will never reach Kreidler’s desk. Members must approve first, and many will fight to keep the co-op independent for many of the same reasons the Premera conversion to for-profit was rejected.

Many will be mad, but powerless. Whether intentional or not, announcement of the merger was announced too late for most members to vote on the deal. Only 27,000 qualify, just 1,133 in Spokane County.

Comments received by Kreidler’s office have been universally negative.

Group Health officials have a mighty sales job ahead of them. They might want to focus on this fact: Washington needs more doctors. If they can show that joining Kaiser Permanente will get them here, they might be successful.

To respond to this editorial on-line, go to www.spokesman.com and click on Opinion under the Topics menu.