Premera decision due today

After nearly two years of hearings, delays and expert reports, Insurance Commissioner Mike Kreidler will announce a decision in the Premera Blue Cross conversion case today in Seattle, according to Kreidler’s office.

Premera, which dominates the insurance market in Eastern Washington, wants to shed its non-profit status and become a for-profit company traded on Wall Street. But the company needs Kreidler’s OK before it can pursue its plan.

Kreidler has several choices. He could approve or reject Premera’s proposal outright. Or he could approve the proposal with certain conditions. Or he could reject the proposal, noting that Premera could come back with a revised proposal.

Premera estimates it has spent $35 million on its bid to become for-profit. The Mountlake Terrace-based company says it needs new capital to beef up its cash reserves and to pay for growth and new products. The company hopes to raise $150 million on the stock market.

Opponents of the conversion include groups representing hospitals, doctors and consumers. They have warned that pressure from stockholders could mean higher premiums, lower reimbursements to doctors and hospitals, and Premera pulling out of unprofitable business lines. They also fear a for-profit Premera could be swallowed up by a larger national company.

Premera executives have called those fears groundless.

Two new charitable foundations, one for Washington and one for Alaska where Premera also does business, would be established in the conversion as a way to compensate the public for the loss of the non-profit company. The foundations would get initial stock valued at an estimated $500 million to $700 million.

Premera’s plan also includes stock options for its top managers. Beginning 12 months after a for-profit conversion approval, Premera’s top 100 managers could receive stock options totaling up to $6.6 million over the course of 10 years.

Kreidler’s staff recommended against approval, but suggested possible changes Kreidler could consider. Those changes included adjustments in the proposed relationship between the charitable foundations and a for-profit Premera. But Premera contends those particular changes would be prohibited by the Blue Cross Blue Shield Association, which licenses the Blues trademark.

Alaska’s insurance commissioner’s staff also recommended against approval.

Cassie Sauer, spokeswoman for the Washington State Hospital Association, said she hopes Kreidler will reject the proposal. “Knowing Kreidler and what he cares about and stands for, that he’s been a passionate advocate for access to affordable health care, our hope is that will continue,” she said.

Premera spokesman Scott Forslund would not speculate on how the company would respond to a rejection or conditional approval.

“It would be premature to respond until we’re able to look at the decision,” Forslund said. “Premera’s board has been and will continue to monitor this closely.”