Kaiser to Acquire Major Washington State Insurer

Kaiser Permanente, the California-based health care and insurance provider, says it will acquire another major insurer in Washington state, Group Health Cooperative.

The proposed deal announced Friday would add about 590,000 members to Kaiser, which already serves more than 10 million people in eight states and Washington, D.C., 7.8 million of them in California. Both insurers are nonprofits which feature integrated systems of health care where they provide insurance and health care providers in one system.

In a joint statement, the companies said the proceeds of the deal, about $1.8 billion, will fund a new, nonprofit foundation, "with the goal of improving community health."

Officials said no immediate changes are planned in coverage and care for current Group Health members. The transaction is subject to approval by Group Health's voting membership and by regulators.

"This agreement is a natural extension of our long, successful working relationship with Group Health and it provides us with the opportunity to expand access to high-quality, affordable care and coverage," Bernard J. Tyson, CEO of Kaiser Foundation Health Plan and Hospitals, said in a statement, and called the two organizations "a natural fit."

The Wall Street Journal cited analysts who said the deal makes sense:

“They are certainly aligned philosophically,” said Raj Bal, an insurance-industry consultant, who added that Kaiser could bring technology and other resources to the smaller insurer, while the combined operation will have significant scale in its region. ...

The Group Health acquisition will draw attention “as a potential bellwether for other deals like it” that Kaiser could make in the future, said Dave Osterndorf, a partner at Health Exchange Resources Inc., a consultancy.

Scott Armstrong, Group Health's president and CEO said that the deal was a "unique opportunity to accelerate our growth and potential." Kaiser said it will invest in Group Health's facilities and technology.

The two plans have allowed the other's members to receive care if visiting the other plan's service area for almost two decades.

Kaiser Permanente is based in Oakland and had $56.4 billion in revenue last year. In addition to its California membership, the plan operates in Oregon, Hawaii, parts of southwest Washington, Colorado, Georgia, Virginia, Maryland and Washington, D.C.

Group Health is based in Seattle and had $3.7 billion in revenue last year. It operates mostly in Washington but also serves two counties in northern Idaho.

This story includes reporting from the Associated Press.