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 WASHINGTON, Aug. 10 /PRNewswire/ -- Group Health Association (GHA) announced today that, by a 12 to 1 margin, its members have approved a proposal to sell Washington's oldest HMO to Louisville, Ky.-based Humana, Inc. (NYSE: HUM), for approximately $50 million.
 The binding mail referendum was approved by a vote of 33,115 to 2,959, or 91.8 percent of the GHA members who returned their ballots before the Aug. 9 deadline.
 The ballots were counted and the results were certified by the League of Women Voters. Louise Perry, the league's elections chairperson, said "it is unlikely that subsequent incoming mail will reverse the results of the election."
 In order to pass, the resolution had to be approved by two-thirds of GHA's voting members.
 The sale is now subject to the approval of insurance commissioners in Maryland and Virginia, municipal regulatory authorities in the District of Columbia and federal agencies.
 GHA officials said the sale should be completed by the end of the calendar year.
 GHA signed a letter of intent with Humana on July 7, which committed both companies to engage in good faith negotiations toward the sale of GHA's assets. The approved ballot measure authorizes GHA's board of trustees to sell all or substantially all of GHA's property and assets to Humana.
 Net 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.
 GHA President and CEO Robert P. Pfotenhauer said that "our back has been against the wall for several years because of proliferating competition, a shrinking share of the local HMO market and increasing health care costs. The sale was clearly the best solution to this steadily worsening situation."
 Since 1984, GHA's market share has shrunk from 41 percent to less than 8 percent and its operating margin now stands at 1 percent. Since January 1992, its membership base has declined by approximately 21,000. In June, GHA announced the elimination of 200 full-time positions and cut $1.4 million in administrative expenses.
 David A. Greenberg, chairman of GHA's board of trustees, said the sale "is the most important milestone in the history of GHA since it was formed 56 years ago. Our members realized the seriousness of the situation and voted accordingly. It was not an easy thing to do, but the overwhelming majority of our members realized it had to be done.
 "The feedback that members of the board received at member forums and other meetings over the last few weeks showed that most people were not willing to gamble their health care coverage by seeing how close to the financial cliff we could take this organization," Greenberg said.
 "We are pleased with this overwhelming endorsement of Humana," said Humana's President and Chief Operating Officer Wayne T. Smith.
 The sale was endorsed by 19 current and former members of GHA's board of trustees and Local 25 of the Hotel Employees and Restaurant Employees Union. About half of the local's 7,000 members are covered by GHA.
 On July 12, GHA mailed ballots to its eligible 134,000 members in Washington, Maryland and Virginia. GHA said 91,500 adult members were eligible to vote in the referendum.
 Humana provides managed health care services to over 1.6 million people and has over $700 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 said it is dedicated to maintaining current benefits that GHA members enjoy under their existing contracts, offering continued coverage for all direct pay and personal pay members, seeking to continue patient-physician relationships, maintaining competitive premium rates, ensuring consumer input through a member advisory board, and continuing the GHA name.
 Humana also intends to introduce new insurance products and expand GHA's network of physicians.
 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.
 GHA, founded in 1937, is a staff model health maintenance organization that provides comprehensive medical coverage to employer- groups, individuals and Medicare beneficiaries in the Washington metropolitan area.
 Humana, based in Louisville, provides managed care services to over 1.6 million members, primarily through the operation of health maintenance organizations and preferred provider organizations.
 -0- 8/10/93
 /CONTACT: Edward Segal for Group Health Association, 202-333-7966, or Laurie Scarborough of Humana, 502-580-1037/

CO: Group Health Association; Humana, Inc. ST: Washington, Kentucky IN: HEA SU:

MH-KD -- DC011 -- 1182 08/10/93 12:03 EDT
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Publication:PR Newswire
Date:Aug 10, 1993

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