Fairview Health Services acquires insurer PreferredOne

Fairview Health Services has acquired sole ownership of PreferredOne, the Golden Valley-based health insurer that saw dramatic growth during the first year of the MNsure exchange only to retreat after financial losses.

Previously, Fairview had a 50 percent ownership stake in PreferredOne, while Robbinsdale-based North Memorial Health Care and a physicians group each had a 25 percent share.

In April, the Star Tribune reported that Fairview had obtained options to expand ownership of the health insurer as part of an $18.75 million loan from the health system to PreferredOne.

The loan followed big growth and losses at PreferredOne, which hiked 2015 premiums in the individual market by an average of 60 percent and withdrew from the state's health insurance exchange. Fairview said in a Monday statement that the changes improved the company's financial outlook.

Financial terms of the acquisition, which was effective Friday, were not disclosed. In a news release Monday, Fairview said the deal fit with a national trend of insurers and health care providers partnering for cost-effective care.

"PreferredOne brings expertise in care management, risk management and population health analytics, and it will be a key strategic asset within our health system as we continue our work to provide high quality care at a lower total cost," said David Murphy, the interim chief executive at Fairview, in a statement.

North Memorial officials said in a statement that the acquisition would allow the health system to "focus on its commitment to long-term growth." The physicians group could not be reached for comment.

David Crosby, who became PreferredOne's chief executive in August, will continue to lead PreferredOne as a wholly owned subsidiary of Fairview, according to the news release.

Crosby replaced Marcus Merz, the longtime chief executive at PreferredOne who retired at the end of 2014 with the MNsure retreat. PreferredOne gained attention nationally for offering some of the lowest premiums in the country to shoppers on new government-run exchange marketplaces, which were launched by the federal Affordable Care Act.

Fairview is one of the state's largest operators of hospitals and clinics, posting operating income of $97.5 million on $2.8 billion in revenue through the first three quarters of 2015.

PreferredOne lost money on operations from its state-regulated health insurance products during 2013, 2014 and the first three quarters of 2015, according to regulatory filings. The figures, however, don't reflect income from the company's business as a third-party administrator to large self-insured employers.

In a written response Monday to questions, Fairview said it "is comfortable with the financial picture for PreferredOne when all business lines are taken into account, including the self-insured business."

PreferredOne currently employs about 335 people.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck