LifeWise Health Plan of Oregon, Inc.

2020 Southwest 4th Avenue, Suite 1000
Portland, Oregon 97201
U.S.A.
Telephone: (503) 295-6707
Toll Free: (800) 296-6707
Fax: (503) 279-5295
Web site: http://www.lifewiseor.com

Wholly Owned Subsidiary of Premera Blue Cross of Washington
Incorporated: 1986 as Pacific Health and Life Insurance Employees: 265
Revenues: $325 million
NAIC: 524114 Direct Health and Medical Insurance Carriers

LifeWise Health Plan of Oregon, Inc., offers health insurance coverage to individuals and to businesses in the state of Oregon. It is part of Premera, a family of companies with headquarters in Washington and operations in Washington, Oregon, Arizona, and Alaska. LifeWise was among the first health plans in Oregon to offer physician visit co-pays, medical savings accounts, and health savings accounts; it was also among the first to allow members to see specialists without first getting permission from their primary care doctors. In 2007 the company boasted a clientele of around 160,000 health plan members.

ORIGINS

The history of LifeWise can be traced to the 1986 founding of Pacific Health and Life Insurance Company in Bend, Oregon, a city at the foothills of the Cascade Mountains. The founders regarded their niche as being providing flexibility and choice to those it insured. The company's first clients were local businesses seeking to offer health insurance plans to their employees, and the enterprise grew quickly. By 1991, the financially strong and growing Pacific Health and Life provided coverage throughout Oregon, with five branch offices in Portland, Eugene, Medford, Klamath Falls, and Pendleton. Pacific Health and Life distinguished itself by allowing plan members to see any physician of their choosing, without referral, and because it offered coverage for the services of physical therapists, registered clinical social workers, and chiropractors.

By 1993, Pacific Health and Life had become Oregon's third largest indemnity health insurance company. The company then left the small employer market behind in order to focus on health plans for individuals. That same year, Washington/Alaska Group Services Inc., a subsidiary of Blue Cross of Washington and Alaska, acquired Pacific Health & Life Insurance Co. The new parent company emphasized its commitment to providing access to affordable healthcare and benefit programs and for its $750 million premium base and 650,000 subscribers and members. "Our primary consideration in this arrangement is our customers," Ted Dicken, president and chief executive officer of Pacific Health and Life, said of the acquisition in a 1993 PR Newswire release. The company by then had a $70 million premium base, 60,000 members, and 120 employees.

The early 1990s was a time of change for health insurers in the state of Oregon. The legislature instituted a reform that required all carriers of health insurance for small businesses to offer a no-frills package at lower rates and created the Oregon Health Plan pool in 1993. Many small businesses in Oregon bought health benefits for their workers from the 34 insurers who joined the pool.

DRAMATIC GROWTH AND PROFIT LOSSES

Despite being part of Blue Cross Blue Shield of Washington, which in 1995 joined with other Blue Cross Blue Shields to form Premera Health Plan, Pacific Health and Life continued to operate independently. It remained in Oregon, and management and employees retained their jobs. Instead of joining the Oregon Health Plan Pool, the company took a step away from marketing traditional group and individual health plans (traditional indemnity insurance). In November 1994, the company signed an agreement with Providence Health System's Vantage preferred provider organization (PPO) to offer a managed-care product for individuals. It also established a collaborative agreement with the Central Oregon Independent Practice Association, central Oregon's largest doctor and hospital network that then consisted of 200 doctors and six hospitals. This alliance enabled it to created a new product, a health maintenance organization (HMO) look-alike that ironically put it in competition with the Providence Good Health Plan managed-care product. The latter also had a contract with the Central Oregon Independent Practice Association.

From 1995 to 1997, LifeWise grew dramatically. Membership doubled overall, while Portland membership tripled. The company's provider network increased from 500, to 5,500 during the same period, while the hospital network grew from six to 38 affiliates. Area HMOs, with more than 1.5 million members, were one of LifeWise's principal competitors. The competition had a disadvantage, however, according to Patrick W. Dowd, who became president of the company in 1996, in a 1997 Oregonian article: "They're vulnerable. They've become not the alternative but the mainstream. Not all people are comfortable with that model. A lot of people in Portland feel underserved and neglected."

In fact, throughout the 1990s, there was a general backlash against managed care in the United States. In response to this reaction, during the second half of the 1990s, some health insurers began to confer coverage for nontraditional, so-called alternative therapies, such as acupuncture, chiropractic care, and naturopathy. Pacific Health and Life, for its part, entered into a marketing agreement with Alternare Group of Portland in 1996 to offer "MyChoice" to its members in Oregon. These members, who by then numbered 62,000, could purchase a card of prepaid visits to alternative providers in Alternare's Holistic Care Network. Cards ranged from $35 discount-only cards to $440 12-visit and discount prescription cards.

Pacific Health and Life changed its name to LifeWise, A Premera Health Plan and established its corporate headquarters and an expanded sales force in Portland. Operations headquarters remained based in Bend, Oregon. The company introduced opportunities unlike those available through managed care: a plan with no gatekeeper physicians, no prior authorizations for hospital admission, and self-referrals to primary care physicians, including homeopaths. "We want to be a significant player in Portland," reported Dowd in the Oregonian article. Dowd, a longtime and influential player in the field of health insurance, had been regional president for Aetna Health Plans in North and South Carolina before joining LifeWise. LifeWise, with anywhere from 80,000 to 85,000 subscribers, also reentered the small employer market, which it had left abruptly in 1993, under Dowd's leadership.

COMPANY PERSPECTIVES

We're committed to providing Oregonians with access to quality health care and peace of mind about their health-care coverage. With LifeWise coverage, members gain access to: a broad range of products and benefit options; a stable, extensive provider network; responsive, local customer service; convenient online services.

However, LifeWise faced a dilemma that its new health plan offerings could not solve. From 1995 to 1999, it endured four consecutive years of net losses. The company was not alone in this regard. In 2000, Providence Health Plan lost $18 million, more than double its losses of 1999. The company's executive position was also in an almost steady state of flux. Marty Stewart took over from Dowd in late 1998, and, in 2000, handed over the reins to Mark Charpentier, a former Physician Partners Inc. executive, who had gained experience in the health insurance field at Pacifi-Care Health Systems. Stewart was hired to be a turnaround man for LifeWise. "Our biggest challenge is to get profitable, to get healthy," he was quoted as saying in a 1999 Portland Business Journal article. "We're a small player, we want to be better known. It will take time. A lot of our competitors have been here a long time."

The tide began to turn for LifeWise in 1999 and 2000, when four of Oregon's five HMOs lost more than 98,000 enrollees combined, an overarching 11 percent drop in membership. LifeWise was able to capture most of these members, gaining more than 39,000 enrollees during a two-year period, a 44 percent increase in membership focused almost entirely in the small employer category. It offered seven new products, small group plans with high deductibles mostly, cut operating losses, and reduced delays in paying claims. It also added a three-tiered pharmacy benefit. To save costs, it closed its Medford office.

DECLINES IN MEMBERSHIP AND REVENUES POSE CHALLENGES

From 1999 to 2003, LifeWise, which changed its name to LifeWise of Portland in 2002, experienced steady membership gains. However, in 2003, it suffered a precipitous 8.1 percent decline to 146,000 members in 2003. This downward trend occurred despite the fact that the company maintained revenues of $348 million, up from $92 million in 1998. In fact, in 2003, most of Oregon's largest insurers enjoyed profits in 2003 while losing membership. Charpentier, quoted in the Portland Business Journal of April 19, 2004, attributed losses to employers moving out of state and to Oregon's high rate of unemployment. "There is only so long people can pay for health insurance while unemployed before cutting back," he reflected. The following year, LifeWise's income dropped 37 percent, despite finishing 2004 in the black. The state's largest health plans all reported strong net income growth for the same period.

During this same period, LifeWise began offering high-deductible plans coupled with medical savings accounts, or MSAs, tax-exempt savings account, to which either employers or employees of small businesses or the self-employed could contribute, that accrued interest on a tax-deferred basis. Then, in 2004, LifeWise began marketing high-deductible plans with health savings accounts (HSAs). HSAs offered the advantage over MSAs of allowing both employers and employees to fund them simultaneously and of being available to anyone under age 65.

By 2005, membership in high deductible plans that afforded customers access to HSAs had yet to reach appreciable numbers, though LifeWise did lead the pack in that niche with more than 7,000 members in its individual HSA plan and more than 8,000 in group HSA plans since it introduced them in January 2004. The company also began to market wellness programs to large employers, a health risk management program that encouraged workers to adopt a healthier lifestyle with accompanying health risk assessments and targeted health coaching.

Despite inroads with large employers, the company's membership still eroded 19 percent in 2005; it lost 8 percent or 10,847 members from the end of 2005 to the end of 2006. Halfway through 2006, Charpentier resigned. Majd El-Azma, LifeWise's sales and marketing vice-president since 2002, was appointed to the position one month later. El-Azma had worked with MyHealthBank and First Interstate Bank before coming to LifeWise. Prior to that he was a seven-year member of the executive management team for PacifiCare of Oregon.

KEY DATES

1986:

Pacific Health and Life Insurance begins providing insurance to businesses.

1993:

Washington/Alaska Group Services Inc., a subsidiary of Blue Cross of Washington and Alaska, purchases Pacific Health and Life.

1995:

Blue Cross Blue Shield of Washington becomes a part of umbrella company, Premera Health Plan, Inc.

1996:

Pacific Health and Life enters into a marketing agreement with Alternare Group of Portland.

1997:

The company changes its name to LifeWise, A Premera Health Plans, and establishes its corporate headquarters in Portland, Oregon.

2002:

The company changes its name to LifeWise Health Plan of Oregon.

The year 2006 was one of double-digit net income growth for the state's largest carriers. However, as LifeWise finished up 2006, its membership was in the vicinity of 120,000 members, significantly less than its 2000 to 2005 average of close to 150,000 and its lowest membership rate in six years. It had dropped 11,600 members from its rolls during 2006 and had lost 42,899 members since 2004. Revenues dropped 13 percent in 2006, and profits from the sale of insurance declined 8 percent. The company blamed its losses on the departure of association health plans, but some analysts suggested that the company's products were not priced competitively. According to one industry commentator in a 2006 Portland Business Journal article: "Premera needs to make a decision about what they are going to do with LifeWise. They need to revamp it to get competitive in the marketplace, or consider cutting their losses and putting the company up on the sales block."

In 2007 the company's operations in Arizona, established in 2003, came under scrutiny as authorities debated the advisability of allowing LifeWise to issue new policies there when its own financial health was foundering. Review, however, suggested that LifeWise had a sound plan for recovery. Speculation then arose that the company would petition to move its base to Arizona. Whether new leadership and more competitive pricing could get LifeWise back on track remained to be seen, but management at LifeWise and parent company Premera insisted that the company provided good products and had great potential.

Carrie Rothburd

PRINCIPAL COMPETITORS

Regence Blue Cross Blue Shield of Oregon; Providence Health Plans; PacificSource Health Plans; Aetna Inc.;

Kaiser Foundation Health Plan of the Northwest; Pacifi-Care Health Systems Inc.; Health Net Inc.

FURTHER READING

Brenneman, Kristina, "LifeWise to Change Its Package in Drive for Profit," Portland Business Journal, December 10, 1999.

Brock, Kathy, "LifeWise Edges Back into Small-Group Market," Portland Business Journal, January 23, 1998.

Caldwell, Bert, "Ailing Health Insurer Is Bad Medicine for Washington," Spokesman-Review, September 9, 2007.

"Even Insurers Say They Don't Like HMOs," Oregonian, April 16, 2001.

"Insurers Waver on Patient Protection Law," Oregonian, August 2, 2002.

Kohler, Vince, "Washington Company to Buy Pacific Health," Oregonian, August 24, 1993, p. G1.

Moody, Robin J., "Health Insurers Report Solid Year," Portland Business Journal, April 16, 2004.

——, "LifeWise Health Suddenly Finds Itself Missing a CEO," Portland Business Journal, June 30, 2006.

"Oregon's Pacific Health and Life Insurance Company to Be Acquired by Washington Health Care Contractor," PR Newswire, August 23, 1993.

West, Diane, "Alternative Care Gets Second Look from Insurers," National Underwriter, April 29, 1996, p. 7.

Woodward, Steven "LifeWise Prescribes Challenge to HMOs," Oregonian, July 12, 1997, p. C1.