Michael Stock, president and CEO of QualChoice.
Catholic Health Initiatives of Englewood, Colorado, is interested in selling health insurance carrier QualChoice Holdings Inc. of Little Rock or bringing in another stakeholder, according to QualChoice President and CEO Mike Stock.
CHI, the Catholic Church-owned parent company of the St. Vincent hospitals, bought QualChoice in 2014. Since then, the insurer has doubled in size and expanded to offer plans in Nebraska, and its application to sell in the state of Washington is pending.
In an interview with Arkansas Business on Thursday, Stock said any change in ownership would mean “business as usual” and not affect its 250 employees or the 155,000 people it insures. He also outlined what a sale of the company could look like.
Stock said the possibility of a sale, disclosed in a recent CHI quarterly report, comes during a lot of transition in the industry.
“My speculation is just that [CHI] thought it was a good time, with all that transition still going on, to pause and see, ‘What’s the value of what we’ve built? Is our strategy getting us to where we want to be? And, if we decided to modify our strategy, what’s the value of this asset we’ve built up to the point it’s at right now?'”
Last summer, Aetna Inc. of Hartford, Connecticut, announced plans to buy Humana Inc. of Louisville, Kentucky, in a deal now worth about $34 billion; and Anthem Inc. of Indianapolis announced plans to buy Cigna Corp. of Bloomfield, Connecticut, in a deal now worth about $44 billion.
Both proposals, among publicly traded managed health care firms, are drawing scrutiny from regulators, and they come at time when cutting costs have become more important amid federal health care reform.
CHI has made acquisitions of its own. Stock noted that over the past three to four years, CHI had purchased QualChoice and Soundpath Health of Washington. The company has also opened and started plans in five new markets.
In Arkansas, QualChoice has participated in the private option, the state’s hybrid Medicaid expansion program now known as Arkansas Works, since it began, and Stock said the company would continue to do so in the program’s current form. He said company has gained “significant” membership growth through its participation, covering 55,000 lives through it right now.
According to CHI’s most recent quarterly report, QualChoice reported $377 million in insurance premium revenue as of March 31. Through the nine-month period ending March 31, QualChoice posted a $96.9 million loss.
Stock noted that, as of now, there is no pending sale, and that any sale of QualChoice would amount to the insurer having a new owner of company stock.
“So the company would continue to operate as it does today,” Stock said. “Our policies would remain in effect, and everything would just be business as usual. It’s just somebody else would own the common stock of the company instead of CHI.”
Stock said it’s also possible that CHI could be considering adding another partner to the ownership. CHI was a minority stockholder before it bought 100 percent of the QualChoice stock; Stock said it’s possible the company could retain a minority ownership.
Stock also said he couldn’t guess at what QualChoice rates would be under a new owner, but that a new owner would want the company’s plans to be competitive in the marketplace.
Stock said the minimum time for any sale to go through would be 18 months, but that the process could take as long as two years. That timeframe could include a 12- to 18-month search for a buyer, six to nine months of due diligence, and a regulatory review by both the buyer and the Arkansas Insurance Department.
There are many options for CHI, Stock said, but, “in the meantime, all we’re doing is taking care of our customers the best way possible, as we’ve always done.”
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