Two bidders in running for University Health Alliance
By Frank Cho
Advertiser Staff Writer
After six potential bidders initially expressed interest in acquiring University Health Alliance's struggling business earlier this month, only two beat the state's deadline this week to submit a proposal and demonstrate they had the deep financial pockets needed to revitalize the ailing health insurer.
A third potential bidder was still evaluating the insurer's business operations yesterday and state regulators agreed to give it an extension until the end of the week to submit a proposal.
State Insurance Commissioner Wayne Metcalf said each bidder had to show it could immediately infuse $3 million to $5 million into the financially strapped insurance company to meet minimum state capital requirements.
The winning bidder would also be expected to pump another $5 million into the insurer within the next year, Metcalf said.
"We expect to begin contract negotiations next week (to select a winning bidder). Hopefully, this process will be expeditious," Metcalf said.
Metcalf said the three companies include Mainland and local insurers, but declined to name specific companies.
University Health Alliance, which insures roughly 32,000 Hawai'i residents, is about $3 million short of the minimum level of financial reserves required by the state.
The reserves are used to cover potential or expected claims against the company.
A spokesman for University Health Alliance could not be reached for comment yesterday.
The company fell into financial trouble last year after it picked up thousands of new members when Queen's Health Systems decided to exit the health insurance market.
But the company was not able to increase its reserve levels as quickly and was finally seized by state regulators last month.
University Health Alliance is the third health insurer to be seized by state regulators over the past six years.
Queen's Health Systems and Kapiolani both exited the state's health insurance market after several years of tough competition and unprofitable operations.
Metcalf said the insurance industry as a whole is very healthy in Hawai'i with several areas, such as automobile insurance, being among the most profitable in the nation.
"The principal problems recently have been in the area of health-care insurance," Metcalf said.
Reach Frank Cho at 525-8088, or at firstname.lastname@example.org