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A year or so ago, the Washington State Office of the Insurance Commissioner surprised everyone in Kitsap County by announcing it had tentatively accepted Group Health Cooperative’s offer to purchase KPS Health Plans. At the time, KPS was working its way out of a state-run receivership, where it had been since 1999, and earlier in 2005 KPS president and CEO Elizabeth Gilje had reported that KPS expected to emerge from state control sometime in 2006.
“We were all surprised,” by the sale announcement, said Gilje, who was unable to comment on the pending sale last year due to an order by insurance commissioner Mike Kreidler.
Despite concern about how the sale would affect KPS’s presence in the county, the health plan’s insurance offerings and KPS’s commitment to repay surplus notes to physicians, the sale to Group Health went through, and was finalized in October 2005.
“Frankly it was the best thing that could have happened,” said Gilje.
According to Gilje, very little has changed at KPS since it became a wholly owned subsidiary of Group Health.
“Things are very much the same,” she said. “We’re allowed to operate as an independent subsidiary.”
Gilje continues to report to KPS’s board of directors. The chairman of the board is also the CFO of Group Health. The board meets four times a year and once a year they will continue to hold member meetings, although now the only member is Group Health.
“There’s a lot of respect between the two companies,” said Gilje, noting that meetings between representatives of the two organizations are referred to on both sides as “collaboration meetings.”
One of the major benefits of the sale for Gilje was that the influx of cash Group Health brought to the table enabled KPS to pay off a significant amount of the surplus notes they owed to a number of the area physicians.
“Last year 50 percent of the surplus notes were paid,” she said. “To me that was the most satisfying.”
Another significant payment is scheduled to be made this summer, although whether the surplus notes will be paid off in full is dependent on how KPS performs in the next year or so.
“I really cannot predict the industry,” said Gilje. “The payment method and process in place is working. But full payment will depend on how KPS does in 2006 and 2007.”
KPS is working closely with Group Health on marketing and planning, so that eventually subscribers will see more unified materials from the two organizations. There are also plans in the works for the two organizations to offer subscribers additional joint benefit programs, such as wellness programs.
“It’s going to take some time to do that,” she said.
Aside from changes in the board composition and the unified marketing efforts that are being developed, it’s pretty much business as usual for KPS, reported Gilje. The insurance carrier’s provider network hasn’t changed and Gilje doesn’t expect it to. Because Group Health is an HMO provider and KPS is a PPO provider, there’s not much overlap in the two organization’s offerings, allowing KPS to retain much of its independence.
“We don’t do what they do, and they don’t do what we do,” she said. In fact, that was one of the things that made KPS attractive to Group Health. Acquiring KPS meant that Group Health added a large PPO offering to its company holdings, enabling it to compete more effectively with Regence Blue Shield and Premera Blue Cross, the two largest health insurance providers in the state. In turn, said Gilje, KPS “now has a parent company that will preserve us in the trough.”
Now that the dust has settled on the sale, part of KPS’s current goal planning is on taking customer service throughout the company up a notch, to ensure that they are delivering top customer service at every level. The company has identified 23 customer service items that have reached an external benchmark and that they want to improve even more, including claims turnaround, fraud investigation and so on.
“Those are the things we are working on,” said Gilje.
The focus on customer service is nothing new, she continued, and it’s one of the things that she feels sets KPS apart from other providers. For example, she said, the average wait time when subscribers call KPS on the phone is 18 seconds.
“That’s something that you don’t get with a large carrier,” said Gilje.
KPS recently launched a new product, called Home Choice, which was in the planning stages before the sale to Group Health. Home Choice is designed specifically for individuals and families in Kitsap, Mason, Jefferson and Clallam counties that KPS serves directly, and has premiums an average of $160 a month less than comparable offerings in the industry.
The idea behind the product, said Gilje, is “when people seek health care they should seek it at home. We developed it as a way to say ‘thank you’ to our local physicians.”
Although the sale was as much a surprise to KPS as it was to the rest of the county, Gilje is proud to say that they had almost no turnover because of it. She attributes this to the strong corporate culture at KPS — a corporate culture that has won them numerous awards as a “Best Place to Work,” including a current nomination by Washington CEO magazine.
“We worked hard to make certain everyone was comfortable,” said Gilje.
Overall the picture looks bright for KPS, which celebrates its 60th anniversary this year. Hard feelings about being sold have been assuaged by the progress the company has been able to make in the last few months. And Group Health, said Gilje, has been nothing but a good parent.
“It’s independent, well-funded, with good business leaders on board,” she said of Group Health. “They are really honorable people. It was the right outcome.”. | 
