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The Honolulu Advertiser
Posted on: Saturday, May 19, 2001

Queen's plan to be sold

By Glenn Scott
Advertiser Staff Writer

Queen's Health Systems said yesterday it has signed a letter of intent to sell the Queen's Health Care Plan Inc., a subsidiary, to Health Net Federal Systems Inc., a managed health care company that contracts with Queen's to serve military families in Hawai'i.

In a legal notice filed yesterday with the state, Queen's Health officials predicted that the sale to Health Net could result in layoffs of a "small number" of employees.

The Queen's subsidiary serves about 118,000 policyholders, the company said. If the sale goes through, Health Net will take over service to the 90,000 customers covered under the TRICARE program with the Department of Defense.

The other 28,000 people will remain covered through parent company Queen's Health Management Corp.

Queen's officials declared last fall that as the nonprofit owner of the state's largest medical center, they wanted to divest their health insurance plans and focus on hospital services.

They initially agreed to sell the Queen's Health Care Plan and a second plan, Queen's Hawai'i Care, to Lifemark Corp. of Phoenix, Ariz. But negotiations with Lifemark were discontinued early this year, according to Queen's corporate spokesman Joel Kennedy.

The deal with Health Net remains subject to a due diligence review, he said. If successful, the deal is expected to close June 30. Financial terms were not disclosed.

Health Net, is a Woodland Hills, Calif., company formerly known as Foundation Health Systems Inc. One of the nation's largest publicly traded managed health care companies, Health Net provides managed care programs to 5.5 million policyholders, including 1.5 million military members and families through the TRICARE program.

Kennedy said the Queen's Health Care Plan has been an ongoing subcontractor to Health Net, providing physicians and administrative services to the 90,000 TRICARE beneficiaries in this region.

In addition to those covered through TRICARE, the Queen's Health Care Plan serves its other 28,000 clients through third-party and self-insured employer plans.

Kennedy emphasized yesterday that those clients will remain covered by parent Queen's Health Management, which will remain in full operation.

At the same time, he said, Queen's officials will continue to search for buyers for the balance of the health insurance programs, including Queen's Health Care, a Medicaid plan serving about 16,000 clients.

Queen's ceased operations as of March 31 for two other commercial insurance plans: Queen's Island Care and Queen's Preferred Plan.

The move by Queen's to divest its health insurance plans comes at a time when other major insurers here have conceded the need to raise fees, citing rising costs related to higher prices of prescription drugs and an aging population.

In announcing the intent to get out of the health insurance business, Queen's leaders said in September that they were having trouble competing with larger insurance providers such as Kaiser Permanente and Hawai'i Medical Service Association.

Glenn Scott can be reached by phone at 525-8064 or by e-mail at gscott@honoluluadvertiser.com