$1.5M New West deal before insurance commissioner

HELENA — State regulators are examining a $1.5 million proposal by an Oregon insurer to take over a portion of Montana's third-largest health insurance company as part of a government anti-trust settlement.

Commissioner of Securities and Insurance Monica Lindeen has scheduled a hearing Tuesday on the proposal by PacificSource Health Plans to buy New West Health Service's commercial business.

The hearing will examine whether the deal is fair and protects the estimated 9,000 New West policyholders who will be affected, said Lindeen spokesman Lucas Hamilton. The hearing will include a public comment period.

The New West buyout is the last major step in the settlement to the antitrust case brought by the U.S. Department of Justice and the state attorney general's office against Blue Cross and Blue Shield of Montana over a deal Blue Cross struck with New West's owners.

If Lindeen approves "the parties are then free to move forward with the transaction," said Judy Beck, spokeswoman for Attorney General Steve Bullock.

Lindeen is expected to make a decision on whether to approve the proposal by March 1, Hamilton said. The two companies have set a target closing date of March 31.

After the divestiture of New West's commercial business is complete, U.S. District Judge Richard Cebull will sign off on a final judgment in the antitrust settlement.

Last year, Blue Cross and five of the six hospitals that own New West struck a $26.3 million deal to switch the hospitals' 11,000 employees' insurance coverage from New West to Blue Cross, the state's largest insurer.

The deal also would have given the hospitals two seats on Blue Cross' board of directors if the hospitals agreed to not compete with Blue Cross in the sale of commercial health insurance.

Federal and state prosecutors objected, saying the deal would have effectively ended New West's commercial business and driven competition out of the state.

Instead, the proposed antitrust settlement splits New West's business into three parts: the 11,000 hospital employees whose coverage will go to Blue Cross, the commercial customers who would go to PacificSource and the company's Medicare Advantage business, which New West will keep.

The settlement is meant preserve competition in those cities where the New West hospital owners operate — Billings Clinic, Bozeman Deaconess, Community Medical Center of Missoula, Northern Montana Health Care of Havre and St. Peter's of Helena.

The sixth New West hospital owner, Benefis of Great Falls, was not part of the Blue Cross deal.

Under the buyout proposal, PacificSource would make an initial payment of $750,000 then follow-up payments of $500,000 and $250,000 if all of New West's commercial policyholders sign on with the Oregon insurer.

The amount that PacificSource pays would go down proportionately if fewer policyholders transfer to PacificSource.

Other provisions of the contract include a non-compete clause to keep New West out of the commercial health insurance business for five years and a $250,000 penalty if New West talks to any other prospective buyers.

The deal also gives PacificSource the first right to buy New West's Medicare business if it decides to sell.

PacificSource already insures 1,500 customers in Montana and has more than 261,000 customers in Idaho, Oregon and Washington.