Health Care

Preferred, Coventry deal gets close look

From the standpoint of the Kansas Insurance Department and the companies involved, the acquisition of a health insurance company is a straightforward business deal, subject to statutory requirements.

But health care providers and insurance brokers say the pending sale of Preferred Health Systems to Coventry Health Care of Kansas already is having an effect on the health insurance business in the Wichita area.

All the parties will have a chance to make their case Monday at a public forum at Wichita State University. A second fact-finding forum will be Friday.

Michael Murphy, Coventry's president and CEO, said he would expect business as usual, at least through 2010, assuming the sale is approved by the Insurance Department.

"We really are committed to the local health plan model," he said.

In other markets, acquired companies have continued to operate under their old names, and that's the intent with PHS, he said.

"Preferred Health has a great brand.... We want to continue that."

Insurance brokers and health care providers are concerned about losing one of the two major health insurers in the area, especially one that has been active in the community, as PHS has. Blue Cross and Blue Shield of Kansas is the other major health insurer in the area; Coventry is third.

"There's some concern about Coventry being national and not local, and how that's going to change," said physician Ron C. Brown, president of the Medical Society of Sedgwick County.

Coventry, he said, "has not been a favorite of physicians, so I don't know how that will play into things. We don't anticipate that they're going to make any sweeping changes imminently, but over six months to a year, there's a little anxiety."

Karen Vines, director of business development for IMA of Kansas, said, "We haven't really gotten a good feel for how Coventry would intend to move forward."

With a major insurer gone from the market, will employers have enough choices? "No," she said.

"I wish that some of the other insurers who have a significant presence in other areas, such as Kansas City, could find a way to have a bigger presence here.... It's just so dominated by so few that it's difficult."

Gary Hardman of Hardman Benefit Plans said, "Any time there's less choice, that's not good for employers."

He said he has already heard from employers with questions about switching from PHS plans to Blue Cross plans. "They're not sure what's going to become of Preferred Health Systems," he said.

With the end this year of exclusive hospital contracts in the Wichita area, he said, employers who once were loyal to one hospital may be more willing to change their insurance carrier.

Blue Cross spokeswoman Mary Beth Chambers said her company would continue to go about its business.

"Coventry is not new to the market. We have competed against Coventry before, as we have long competed against PHS," she said.

"Obviously, this sale would put Coventry in a position to have a larger market share right off the bat, but Coventry and PHS are both companies that we have had involved in the Wichita market.... We will continue to try to differentiate ourselves from any of the competitors in a market."

Coventry's Murphy said the company's Wichita employees work "a baseball throw away" from PHS' office. "I don't have any idea today how or when or how much" the total number of employees may change, he said, though "We would look to consolidate the two offices that we have today into one."

Once the sale is approved, he said, Coventry will begin work on what it will take to merge two systems and which products will take the lead in this market. "I'm not sure how long that whole process will take."

When the sale was announced in early October, officials of both companies said they expected it to be completed in 90 to 120 days.

Ken Abitz, director of financial surveillance for the Kansas Insurance Department, said he didn't know how long it would take the Insurance Department to finish its review. "I would say within, at the maximum, 30 days."

He said the department has statutory requirements for what must be reviewed in an acquisition, such as details of the acquiring company's board, its business operations, the amount of the sale and how the price was determined, and plans after the sale.

The Insurance Department is not required to hold a public hearing but has decided to because "this is a unique situation because of the importance of health insurance in the state of Kansas and the United States.... It's just a normal process, but something that we typically don't do."

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