Strike Takes Toll on PacifiCare

PacifiCare Health Systems Inc. warned investors Friday that the Southern and Central California supermarket strike and lockout could derail a predicted enrollment increase and reduce earnings in 2004.

The Cypress-based company, one of the largest providers of the government’s Medicare health plan, said 28,000 of the 48,000 members of the United Food and Commercial Workers union it covered became ineligible for benefits Jan. 1. The 20,000 who are still covered, PacifiCare said, are union members elsewhere in California who are not on strike

A PacifiCare spokesman said the striking and locked-out workers lost their eligibility because they had been unable to work the minimum 96 hours per quarter required by the company’s contract with the union. Some workers have opted under a provision of the expired contract to pay about $400 to continue coverage through March 31.

For PacifiCare, the loss of covered members forced the company to back away from a prediction last month that it would achieve a modest, single-digit increase in its enrollment of 2.2 million members.

Leaders of seven UFCW locals called a strike at Safeway Inc.’s Vons and Pavilions on Oct. 11, when contract negotiations broke down. Union employees at Kroger Co.’s Ralphs stores and Albertsons Inc., which bargain jointly with Safeway, were locked out the next day.

In a statement, PacifiCare also said that the strike and lockout could reduce earnings per share for the year by 14 cents to 19 cents on a pre-stock-split basis. Analysts have expected the company to earn $6.07 a share.

Analysts said the strike would have only a modest effect on the company, citing larger issues of an unusually early and severe flu season and the positive effect on earnings of the addition of a drug benefit for seniors on Medicare.

Shares of PacifiCare fell $1.94 to $61.40 on the New York Stock Exchange. The price has more than doubled in the last year.