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GROUP HEALTH ASSOCIATION ASKS MEMBERS TO APPROVE SELLING WASHINGTON'S OLDEST HMO TO HUMANA FOR $50 MILLION

 WASHINGTON, July 12 /PRNewswire/ -- Group Health Association, facing a proliferation of competitors, reduced market share and spiraling health care costs, said today it will ask its eligible 134,000 members to approve a proposal to sell the area's oldest health maintenance organization (HMO) to Humana, Inc. (NYSE: HUM), for approximately $50 million.
 Humana, based in Louisville, Ky., provides managed health care services to over 1.6 million people and has $685 million in cash and marketable securities. Humana has a successful track record of acquiring financially troubled HMOs and restoring them to profitability. Over the past seven years it has purchased a total of 15 HMOs and preferred provider organizations across the country.
 Humana has assured GHA that it will continue coverage for all GHA members, provide the HMO with much-needed capital to continue its operations, intends to contract with GHA physicians, ensure consumer input through a member advisory board and intends to continue the GHA name.
 GHA President and CEO Robert P. Pfotenhauer said the sale of the HMO to Humana "will end a 10-year roller coaster ride of financial uncertainty for our members. The Humana proposal represents the greatest promise for GHA to be able to continue providing high quality health care services to our members, continue to exist as a managed health care provider, and to regain our former prominence in the marketplace.
 "Unfortunately, our profit margin is now only 1 percent, and our financial forecast is so bleak that, if our members do not approve this sale, GHA's future will be in doubt," he said.
 Pfotenhauer said that of all of the offers GHA received, "no other company came close to matching Humana's fair value offer or their assurances to provide our members with continued coverage, seek to maintain physician-patient relationships, retain GHA's name, and provide us with much-needed capital."
 If the sale is approved, GHA said Humana would intend to expand the services available to members, introduce new insurance products, add facilities throughout the region, and expand GHA's planned network of private physicians.
 On July 7, GHA signed a letter of intent with Humana which committed both companies to engage in good faith negotiations towards the sale of GHA's assets.
 The sale is subject to the approval of insurance commissioners in Maryland and Virginia, regulatory authorities in the District of Columbia, federal agencies, and a two-thirds vote of approval by GHA's members voting.
 Today GHA mailed a ballot resolution to its 91,500 voting members in Washington, Maryland and Virginia. If approved, the resolution will authorize GHA's board of trustees to sell all or substantially all of GHA's property and assets to Humana. Returned ballots must be postmarked no later than Aug. 9.
 Proceeds of the sale will be used by GHA to establish a new tax- exempt, not-for-profit foundation that will support local community or other charitable health-related causes.
 Board of Trustees Chairman David Greenberg said the board "did not arrive at this crucial decision quickly or easily. Over the last eight months we've held hundreds of hours of deliberations about and discussions with 12 other national and local health care organizations."
 He said the offers included proposals to merge, affiliate, convert or sell the 56-year-old HMO. Because of the confidential nature of the discussions, he said the names of the other companies will not be released.
 "The board is convinced that the Humana offer is fair and provides the best hope for our members under the circumstances. I'm confident we will gain members' approval when they realize this move will help secure their health benefits and allow GHA to ensure affordable premiums," Greenberg said.
 Since 1984, GHA's market share has shrunk from 41 percent to less than 8 percent. Since January 1992, its membership base has declined by approximately 21,000. Last month GHA announced the elimination of 200 full-time positions and cut $1.4 million in administrative expenses.
 Unless the sale is completed, GHA said that more such reductions will be inevitable.
 GHA officials said Humana's track record with managed health care plans "is impressive." Over the past seven years Humana has acquired 15 health care plans, some of which were financially troubled, and all of which have been restored to financial health.
 A notable example is International Medical Centers in Florida which Humana acquired in 1987 out of receivership. At the time, the health plan had substantial operating losses. Under Humana's ownership, the health plan is now profitable.
 Humana employs approximately 8,600 people nationwide and has under contract more than 24,000 hospitals, physicians, pharmacies and other providers.
 In 1992, GHA sought to convert to a for-profit corporation. The move would have enabled it to improve its relationship with its health care providers, develop new products and gain access to outside capital.
 The conversion was approved by over 60 percent of the members voting, but failed by less than 1,000 votes to obtain the two-thirds vote required by District of Columbia law.
 -0- 7/12/93
 /CONTACT: Edward Segal for Group Health Association, 202-333-7966, or Laurie G. Scarborough of Humana, Inc., 502-580-1037/
 (HUM)


CO: Group Health Association; Humana, Inc. ST: District of Columbia, Kentucky IN: HEA INS SU:

DC-MH -- DC019 -- 0412 07/12/93 12:18 EDT
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Date:Jul 12, 1993
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