PacifiCare Dropping 60,000 Ohio, Kentucky Customers

PacifiCare Health Systems Inc. will stop providing managed care plans to more than 60,000 members in Kentucky and Ohio in a move that continues the company’s strategy of focusing on operations in the western United States.

The Santa Ana health care company, the nation’s largest operator of Medicare health maintenance organizations, has agreed to turn over 54,400 members of commercial health plans to Anthem Blue Cross and Blue Shield in Indianapolis, PacifiCare said Wednesday.

The 6,300 Medicare recipients enrolled in PacifiCare’s Secure Horizons program in those states will have the option of reverting to traditional Medicare or finding another Medicare-based HMO.

PacifiCare will continue to provide coverage for members in both Secure Horizons and commercial programs until the deal is completed Dec. 31, the company said.

Health insurers around the country are struggling with rising health care costs. Some are raising premiums and dropping unprofitable businesses such as Medicare. PacifiCare reported a 4% decline in first-quarter profit.

The company previously announced plans to quit its Midwestern Medicare HMO business and decided that a simultaneous exit from its commercial lines made the most sense, company spokesman Ben Singer said.

Singer said the company has no plans to leave any of its remaining commercial markets but could, as it has in the past, pull out of smaller Medicare markets. Insurers have a July deadline for informing the U.S. Health Care Financing Administration of such plans.

“Our business outlook for the second quarter and year 2000 remain on track,” Alan Hoops, PacifiCare’s president, said in a statement.

The company’s exit from Ohio and Kentucky will result in a second-quarter charge of $3 million to $4 million, or 5 cents to 6 cents per share. About 49 jobs in PacifiCare’s Cincinnati office will be eliminated. PacifiCare executives expect many employees to be offered jobs by Anthem.

PacifiCare picked up thousands of members in Kentucky, Ohio, Indiana and Illinois in 1997 when it acquired rival HMO FHP International Corp. in Fountain Valley. PacifiCare exited business in Indiana and Illinois in 1998.

With the change, PacifiCare will be left with about 3.7 million members in California, Arizona, Washington, Oregon, Nevada, Colorado, Oklahoma, Texas and Guam.

Its stock lost $1.69 Wednesday to close at $67.38 a share.