By Bob Young

The Seattle Times

The acquisition of Washington’s historic Group Health Cooperative by California-based Kaiser Permanente moved a key step closer to completion Tuesday.

State regulators endorsed the deal at a hearing before Insurance Commissioner Mike Kreidler, who has final say on the proposal. Kreidler is expected to issue his decision by the end of the month.

Accountants, lawyers and other experts with the Office of Insurance Commissioner began reviewing the deal early last year. The office is required by law to assess whether such acquisitions would have a negative impact on competition and consumer choice.

In written and sworn testimony Tuesday, the state’s chief reviewer, Ronald Pastuch, said the deal would not lessen competition in Washington state or be hazardous to the public. Pastuch also found no evidence that Kaiser plans to sell Group Health assets or merge it with any other entities.

His recommendation makes it all the more likely that Group Health, called “radical” and “socialist” after it was founded by local doctors and unions in 1947, would come under control of the much larger Kaiser, which has 10.6 million members in eight states and Washington, D.C., and $60 billion in 2015 revenue.

Group Health has some 600,000 members in Washington and northern Idaho and annual income of $3.5 billion.

Although Group Health members were concerned about such a change, the organization’s board of trustees “felt overall this acquisition put our members first,” testified board Chairwoman Susan Byington.

Both Byington and Kaiser executive Susan Mullaney told Kreidler Tuesday the two organizations are compatible. Both are nonprofit, both pioneered integrated care and they share a mission of quality affordable care, Byington and Mullaney said.

Group Health’s board had begun considering such partnerships in 2014, Byington said, because of declining membership and insufficient capital for future investments. That jeopardized the level of care members had come to expect, she said.

Under terms of the deal, Kaiser would pay Group Health $1.8 billion and pledged to contribute another $1 billion over 10 years to improve facilities and technology.

Kaiser also expects to contribute $800 million toward unspecified community benefits in the first 10 years after the acquisition.

Mullaney said no jobs should be lost in the deal. She said Kaiser would honor all existing union contracts, and nonunion employees would see no changes in the first nine months after the acquisition is approved.

Pastuch did recommend that Kreidler impose conditions on the deal. He said it may be beneficial for Kaiser to create a Consumer Advisory Committee and maintain Group Health’s Senior Caucus, a group of members 60 or older who give input to the board on care for the aging.

Mullaney told Kreidler that Kaiser would keep the Senior Caucus alive and establish a 25-member consumer committee.

Pastuch did not find evidence the deal would amount to market dominance by the new entity, as Kaiser counted roughly 79,000 members in Washington. Together, Group Health and Kaiser would hold 16 percent of the state’s total market, he said.

In public hearings last year in Tacoma, Seattle and Spokane, Kreidler heard almost nothing but support for the acquisition from Group Health members and employees.

Kreidler previously disclosed his past relationship with Group Health, where he worked as an optometrist from 1972 to 1993. Group Health also has been the health-care provider for Kreidler’s family.

But Kreidler said he has no retirement plan with Group Health, and none of his family members work for Group Health or Kaiser.

State law does not disqualify him from presiding over the acquisition, he said.

“I will be fully impartial,” Kreidler wrote last year in disclosing his background and role in the coming decision.