Over the strenuous objections of the City of Bremerton as well as local doctors and much of the local business community, Insurance Commissioner Mike Kriedler has asked for court permission to sell Bremerton-based KPS Health Plans to Group Health Cooperative. The nonprofit insurer has been steadily emerging from receivership during six years of operation under the supervision of the Insurance Commissioner’s office.

Kriedler has approved the proposed $19 million sale of KPS — which is an amount significantly less than the value of real estate assets KPS owns outright — not to mention its other assets.

Sale provisions call for Group Health to maintain a separate corporate identity and presence in the community, and to continue serving its 55,000 subscribers from Bremerton for the next four years only. After that period, Group Health is free to move KPS and its 200+ family wage jobs out of Kitsap County if it so chooses.

The insurer was placed under the Insurance Commissioner’s control in 1999 as it teetered on the brink of insolvency with an $8 million operating deficit. The subsequent plan to rehabilitate the company included a restructuring of its debt, installation of new management, including President and CEO Elizabeth Gilje, and an eventual corporate reorganization.

The sale to Group Health took the community completely by surprise. KPS has been operating in the black for the past several years and was making significant strides towards continued profitability. The company had been led to believe by Kriedler’s office that it needed cash reserves totaling substantially less than the $19 million Kriedler stated were required for it to emerge from receivership at the time he announced the sale to Group Health.

The City of Bremerton was trying to come up with a plan to save the insurer and keep it locally based. It made a proposal to the insurance commissioner that called for less up-front money, but it was rejected. Kriedler has taken the position that the $19 million figure was absolutely non-negotiable.

The entire KPS board, as well as Gilje, have all been under a gag order by Kriedler. However, reliable sources have informed the Business Journal that another offer had been tendered for the company that wasn’t even considered by Kriedler — who spent a large portion of his private sector career with Group Health. Kriedler’s office has refused to answer questions about that offer, and Kriedler himself has declined to return telephone calls about the other offer.