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By ERICA CURLESS Missoulian State Bureau Insurance plan to reorganize in hopes of lowering premiums

HELENA - Not wanting to raise its customers' health insurance premiums to lift the company out of financial woes, Montana Medical Benefit Plan of Kalispell will turn over its business to a Missoula-based life insurance company.

The deal is waiting approval by the state insurance commissioner, state Auditor Mark O'Keefe, but nobody anticipates it will be anything but good for the 17,000 Montanans insured by the two companies. Policyholders have until May 4 to comment on the proposal.

"We don't see a lot of potential for policyholders to be harmed by this proposal," said Peter Funk, state deputy insurance commissioner. "We see enough potential for a benefit to policyholders at least at this point in time. We're saying it ought to go forward."

Missoula-based Montana Life Assurance, a for-profit company, plans to assume MMBP, one of the state's largest nonprofit individual health insurers, June 1. At that time, Montana Life will begin collecting premiums and paying MMBP's claims. MMBP will essentially manage both life and medical insurance plans, which will bring together 1,300 Montana Life policyholders and 16,000 MMBP customers.

MMBP's financial problems began in 1998 when its reserve cash, required by the state, dropped below the mandatory $500,000 level. The company continued to pay policyholders' claims, but didn't have enough cash in its safety net pool. The state insurance commissioner kept close tabs on the company, demanding monthly financial reports to make sure the people it insured had reliable coverage.

"The cost of medical care kept going up," said MMBP President Ed Grogan of Kalispell.

As costs went up, the company was forced to increase premiums.

"We were frankly very worried and we wanted to look over their shoulder closely," Funk said, about the state's need to monitor the company.

That's when Montana Life entered the picture. This mostly life insurance and annuities company didn't have any agents to sell its product so business was stagnant. But because it is a for-profit company, it did have cash.

Montana Life President and Chief Executive Officer Anthony Fagiano said the company's stockholders are excited about the deal and that no policyholders of either company came to complain during two public meeting in Kalispell and Helena this week.

"The comments have been good because this could actually increase the value of their stock," Fagiano said.

And for policyholders, Grogan said the joining is good because MMBP can now raise revenue instead of prices on insurance coverage.

Funk agreed: "We don't see any reason policyholders will be harmed because there is serious potential they will do better than if it stays with MMBP."

By combining, both companies get what they need: Montana Life gets agents to market the insurance policies, and MMBP gets cash by becoming a for-profit, which can sell stock and attract investors. If board members agree, the new company will be named Montana Medical Benefit and Life and Grogan will remain president.

Thus, both companies say this is the perfect marriage to keep in business and stop policyholders from having to bail out MMBP financially through increases in their already higher insurance premiums.

If the deal goes through, MMBP must set aside a pool of money to pay for all claims made prior to its assumption by Montana Life. Grogan estimates it will contain more than $3 million.

Funk said it's difficult to estimate how many outstanding claims MMBP will have, but said it's been about $1.7 million to $2.1 million.

Grogan also anticipates the new company will expand into Idaho, North Dakota and Wyoming. Eventually, it plans to do business in 13 western states.

If you're interested

Any current MMBP or Montana Life policyholders with comments about the deal should send their written response to Mary McCue at P.O. Box 4416, Helena, MT, 59604.

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