President Clinton's plan to change the nation's health-care system is still a long way from becoming law, but its potential impact was felt in Utah Monday when a 34-year-old health insurer agreed to merge with a larger Arizona company.
Intergroup Healthcare Corp., based in Tucson, will acquire Gem Insurance Co., a Salt Lake City-based, closely held company that provides group and individual health insurance to some 75,000 customers in Utah and five other Western states.The purchase price of approximately $17 million - to be paid in cash or cash and stock, at Intergroup's discretion - will be based on audited financial statements as of Dec. 31. If the company is bought with both cash and stock, the shares will total 20 percent of the purchase price.
A Gem spokesman said the name of the company will remain the same as will its offices at 525 E. 100 South. She said plans call for all employees to keep their jobs and "continue doing what they're doing."
The two companies have signed a non-binding letter of intent with plans for a definitive purchase agreement to be signed next month and the acquisition completed shortly afterward.
A spokesman said it is expected that Gem will be operated as a separate division of Intergroup that will specialize in providing health insurance to employees of small companies.
"Gem will continue to sell and serve its indemnity insurance products in its current markets and be able to move forward in a market driven by health-care reform," said Rick Barrett, president and chief executive officer of IGHC.
In November, an Intergroup subsidiary, Intergroup Healthcare Corp. of Utah, said it would acquire Utah's Premier Medical Network, a preferred provider network of 19 Utah hospitals and some 900 doctors practicing in Utah in a variety of medical specialties.
That acquisition is expected to be completed in the first quarter of next year. Premier currently provides health services for some 98,000 Utahns and 250 businesses.
"We feel this (acquisition of Gem) enables us to be part of a company with an outstanding track record in managed health care," said Gem president Clark T. Parkinson. "It also positions us well to anticipate and respond to health-care reform."
He added that the merger also will enhance Gem's relationships with its agents and brokers by affording them the ability to offer managed care plans with Premier Medical to new and existing clients.
Gem reported revenues of $60 million last year. Launched in Utah in 1959, it has 135 employees serving members in Utah, Arizona, Colorado, New Mexico, Nevada and Nebraska. The majority of members, 48,000, are in Utah.
The combined strengths of Intergroup Utah, Premier and Gem positions Intergroup to offer businesses and individuals "a full range of competitively priced health-care options," said Barrett, noting that these range from traditional insurance to fully managed health maintenance organization coverage.
"Intergroup's philosophy is to establish partnerships with strong, well-managed organizations that share Intergroup's commitment to providing quality, cost-effective health-care options. Gem Insurance Co. fits that description."
Intergroup's stock is traded on the NASDAQ national exchange. Its shares closed Friday at $45, up $1.
The company has 295,000 members and offers a variety of health-care plans through its subsidiaries, including a health maintenance organization, preferred provider organization, point-of-service plan, third-party administrator services and coverage for Medicare and Medicaid recipients.
In 1992 and 1993, Intergroup was named to Forbes magazine's list of the nation's best small companies - ranked 14th in 1993 and 6th in 1992.