Commissioner Senn Moves to Protect Subscribers and Providers of Failing Health Insurance Carrier.

OLYMPIA, Wash.--(BUSINESS WIRE)--Aug. 2, 1999--

The Thurston County Superior Court on Monday named State Insurance Commissioner Deborah Senn receiver of the financially-troubled Kitsap Physicians Service, capping months of financial decline for the Bremerton-based health care service contractor.

Commissioner Senn said the receivership would protect the 72,000 KPS subscribers whose benefits had been jeopardized by the carrier's sagging financial condition.

"This step was necessary to prevent subscribers' benefits from jeopardy," Commissioner Senn said. "Our goal is to rehabilitate the carrier if at all possible, but first we have to stop the bleeding and stabilize the patient."

Receivership means that Commissioner Senn will operate the company and that subscribers will continue to receive health-care coverage as before. Subscribers should continue to pay their premiums and expect their health benefit to remain intact.

"Placing a company in receivership is the last, reluctant step in a long process to seek other solutions," Commissioner Senn said. KPS, which collected $98.7 million in premiums during 1998, has been under special supervision by the Office of the Insurance Commissioner for more than a year due to serious concerns about its financial decline. The carrier lost $2.8 million in 1998.

Earlier Monday, the KPS board voted for the receivership move and authorized the state's legal counsel to endorse the judge's order. KPS agreed to seek the receivership protections after Commissioner Senn's analysts concluded the carrier had fallen far below the net worth requirement of $3 million set in state law. Although the carrier made a final effort in the closing weeks of July to come up with extra capital, the plans fell through.

"KPS' financial difficulties appear to be largely the result of losses due to underbidding on government contracts and do not reflect its general health insurance operations," Commissioner Senn said. She noted that KPS group and individual lines have been in generally good shape despite the government-contract losses.

"The company asked for and received only a 6% increase on its individual lines this spring, indicating that those products are carrying their own weight," Commissioner Senn said. Financial data supporting the rate request showed that KPS' individual claims costs were well within the range that insurers say should produce profit.

Commissioner Senn also noted that the losses on government contracts were especially dangerous because about 60 percent of KPS' subscribers are covered under those contracts. Only about 4,000 of KPS' 72,000 subscribers are covered by individual plans.

Commissioner Senn said she was aware that the carrier had a good deal of support in the Kitsap area it primarily served, and she said she shares the concerns of community groups and leaders about the potential loss of KPS.

"KPS dates back to the mid-1930s, and it has a long history of furnishing valuable regional health care coverage on the Olympic Peninsula," Commissioner Senn said. "I will do everything within my power to keep that tradition alive."

Web Page: http://www.wa.gov/ins

EDITORS: Any KPS subscribers concerned about their coverage or who have questions about KPS' financial condition may call Commissioner Senn's toll-free Consumer Hot Line at 800/562-6900.