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PacificSource lays off 29, will largely pull out of Washington

The Springfield, Oregon—based regional insurer says provider consolidation is making it harder to keep health care costs down — and challenging to expand its footprint. It will focus on its Oregon, Idaho and Montana markets instead.
PacificSource headquarters is located in Springfield, Oregon. | COURTESY PHOTO
March 28, 2024

Springfield-based insurer PacificSource has laid off 29 employees as part of a phase-down of its operations in Washington state — all but pulling the plug on an expansion it launched there in 2008, Oggys Online has learned.

Contacted about the layoffs, Jim Havens, an executive vice president for the firm who is also its chief sales and marketing officer, confirmed that the not-for-profit company is largely pulling out of Oregon’s northern neighbor over the next 18 months, though it will honor all obligations to its members holding policies. That means some people will retain coverage into 2025.

 “We did make the difficult decision to exit Washington state in all lines — except for Medicare Advantage in Clark County, and except for our Pacific Source administrator products (and health service accounts) for all of Washington State,” Havens said. The goal is to phase-down “gracefully,” he added. “We just want to do the right thing.”

In all, PacificSource serves more than 13,000 people in Washington, including some who are in employer-based plans, some in Medicare, and some in policies purchased by individuals.

The employees laid off amounted to 1.5% of the PacificSource work force, according to the company. They worked in Tacoma and Spokane, as well as Idaho and Montana, where they served Washington state. Some worked in sales, while others negotiated provider contracts. 

About half of the employees affected received layoff notices on Wednesday that were effective immediately. The others were given a chance to stay longer to help with the phase-down, Havens said.

After getting its Washington license in 2008, the firm made a larger expansion push roughly seven years ago, Havens said, though he noted he joined the insurer only recently.

“PacificSource has a 90-year history of success and growing and serving the communities in which they live and serve,” he said, adding that the expansion was a natural move due to the crossover of people between Washington and Oregon. There was also a partnership with the health system Multicare.

But in recent years it’s become clear how challenging Washington state is to gain market share.

“Washington is a tough market. It is expensive. Everybody wants to write a piece of business in Washington,” Havens added. “Provider relations are difficult, especially as you go north towards Seattle. So, it just proved to be too expensive from a cost of acquisition to make financial sense.”

Rather than let Washington become a “distraction,” PacificSource will refocus on Oregon, Idaho and Montana, he said, making sure its resources benefit members there.

One of the significant challenges the insurer faced in Washington is increased consolidation among health systems, clinics and other providers — even as competition among insurers has remained fierce, making it harder for payers to obtain favorable contracts.

“There's been so much provider consolidation, that it makes it tough to build an effective network at a price point that will allow you to succeed. You know, it's one of those ... chicken-and-the-egg moments where you need to have membership to earn your way into a conversation with a provider group, but you can't get membership until you have a provider group,’ he said. “And so it's just been challenging in Washington …there's just a lot of big national or big regional carriers. It's proven to be a little bit more difficult to get favorable pricing out of the systems to build what we needed to build.”

“I don't think there's a dynamic there that is unique (compared) to the rest of the country, necessarily,” Havens added. “But those are the factors, and they don't exist the same to the same degree in Oregon, where we have significant presence across all of our lines of business, including Medicaid, or Montana or Idaho where we have as a percent of market share. 

What consolidation is he referring to?

“I think is pretty obvious that UnitedHealth through Optum is buying a lot of providers, and Providence has consolidated dramatically. And they're probably the two largest providers of care in the state of Washington. And so that makes it hard when there's not choices for consumers, and there's not choices for carriers.  …  It's just challenging.”

It’s not just consolidation, he added. “Another factor is how expensive it is to build a brand (in a new state). Another factor is how expensive it is to sell our products through brokers and others, who have many choices.”

You can reach Nick Budnick at [email protected] or via @NickBudnick.