Washington state insurance regulators have asked a nonprofit health carrier based in Washington to pull back on efforts to start a for-profit health plan in another state.
Premera Blue Cross, Mountlake Terrace, Wash., should stop selling new coverage through its LifeWise Health Plan of Arizona unit and “immediately file a viable financial plan” for the Arizona unit, according to Washington state Insurance Commissioner Myron Kreidler.
Premera has put $37 million into LifeWise, Scottsdale, Ariz., and now plans to put another $12 million into the unit, Kreidler says.
Kreidler says Premera projections show the company does not expect LifeWise to turn a profit in Arizona until 2012.
Premera appears to be using premiums from Washington state customers to subsidize the coverage for LifeWise customers, Kreidler says.
Washington was going to let Premera continue selling LifeWise coverage in Arizona, but Premera has not compiled with a request from Washington regulators for a detailed plan for reforming LifeWise, Washington officials say.
Washington officials say Premera must respond to their request for a LifeWise reform plan by Aug. 24.
“Failure to comply can result in penalties up to and including revocation of LifeWise Health Plan of Arizona’s certificate of authority to do business,” Washington officials say.
LifeWise “is taking immediate steps to comply with the regulator’s order to stop new sales,” the company says in a statement. “We continue to serve our 32,000 existing Arizona members well. We are working to resolve this issue so we can recommence Arizona sales at the earliest possible time.”
Companies do not normally expect startups to be profitable immediately, and Premera is hoping that LifeWise will be to cover its own direct costs by 2010, LifeWise says.
“This is a long-term investment and not a short-term speculation,” LifeWise says. “The investment in LifeWise is part of a strategy for long-term growth that includes investment in technology, products and service to all of its members.”