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Kaiser bails out of Kansas and Missouri, sells HMOs to Coventry

"We were never really able to achieve the size and scale necessary to make our brand of health care successful."

Unable to grab a larger share of the Kansas City metropolitan market, Kaiser Permanente has announced it will sell its Kansas and Missouri HMOs to Coventry Health Care, a move that will impact more than 55,000 Kaiser members.

According to Kaiser officials, the proposed transaction means most Kaiser members will become Coventry members sometime this spring, pending the sale's approval by regulators with the departments of insurance in Kansas and Missouri. A sale price was not disclosed.

"We intend to assure a smooth transition for our members and employer groups during the next few months," says Cynthia A. Finter, president of Kaiser Foundation Health Plan of Kansas City Inc. (KFHP-KC). Kaiser Permanente owns KFHP-KC.

The crowded managed care market in the Kansas City area prompted Kaiser's decision to close up shop. "We were never really able to achieve the size and scale necessary to make our brand of health care successful," says Kaiser spokesperson Matthew Schiffgens. Kaiser, headquartered in Oakland, Calif., is the nation's largest nonprofit HMO with 8.1 million members.

Largest Kansas City area HMOs by membership, 1999

  1. United HealthCare (168,520)
  2. CIGNA (81,194
  3. Coventry (74,362)
  4. Blues Advantage (87,228)
  5. Kaiser (55,604)

Source: Kansas Department of Insurance

At the close of 1999, there were 12 HMOs in operation in the Kansas City area, providing health care services to residents living near the border between Kansas and Missouri. If the Kaiser sale is approved by regulators, Coventry would become the second-largest HMO in the Kansas City market.

All medical offices will be closing

Kaiser says it will immediately begin plans to close its four Kansas City area medical offices, but its five pharmacies will remain open for its members until the sale is completed. Health care services at Kaiser's Blue Ridge and Northland medical offices will cease, effective March 1, 2001. Health operations will shut down at Kaiser's Baptist and Parallel medical offices on April 1, 2001. Blue Ridge, Northland, and Baptist are located in Missouri and Parallel is located in Kansas.

As the offices close, Kaiser says it will transition members to community physicians in the KFHP-KC network, many of whom are also in the Coventry provider network.

The closings will also impact 425 Kaiser employees and physicians. Finter says Kaiser will provide benefits-eligible employees and doctors with severance pay and outplacement assistance.

Coventry Health Care, based in Bethesda, Md., operates health plans and insurance companies under the names Coventry Health and Life, Carelink Health Plans, Group Health Plan, Health America, Health Assurance, HealthCare USA, Southern Health, and WellPath. The company provides managed care products and services, including HMO, PPO, POS, Medicare Risk and Medicaid, to 1.7 million members throughout the Midwest, Mid-Atlantic, and Southeast United States.

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