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BENEFIT TRUST BUYS INSURER

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CHICAGO -- A self-funded health care program that covers members of two Illinois medical societies is buying a dormant insurance company to write coverage and better compete for society members.

The purchase of Illinois-domiciled United Independent Life Insurance Co. by Physicians' Benefits Trust, is believed to be the first time that an employee benefit plan has bought a commercial insurer, trust administrators say.

Starting next January, members of the Illinois State Medical Society and the Chicago Medical Society will be able to buy health care coverage from the newly-named Physicians' Benefits Trust Life Insurance Co.

By operating as a commercial insurer subject to state oversight and capital and surplus requirements, the health care program could attract more policyholders.

"This will improve marketing. Policyholders will know that this will be a state-regulated company and they have confidence in that," said Bruce Mathews, administrator of Physicians' Benefits Trust and director of the employee benefits practice of R.T. Nelson & Associates Ltd. in Chicago, a third-party claims administrator that manages the PBT program.

"Medical practices are becoming larger as a result of mergers and we believe the larger practices will find our status as an insurance company more appealing" than purchasing coverage from the self-funded program, Mr. Mathews added.

United Independent Life, which was owned by Blue Cross & Blue Shield of Missouri but not activated, holds licenses in five states -- Illinois, Indiana, Iowa, Missouri and Wisconsin. As a result the new health insurance program could be expanded in the future beyond Illinois.

"This will give the program the flexibility of future expansion," Mr. Mathews said. There are no current plans, though, to expand the program beyond Illinois, he added.

United Independent Life, which PBT bought for about $3.6 million, was a "perfect purchase" because it has no liabilities and about $3.4 million in assets, he said.

PBT, which actually is composed of several trusts, now provides health care coverage to about 10,000 individuals. The largest trust -- which legally is a voluntary employee beneficiary association, or 501(c)(9) trust -- provides coverage to medical groups with at least two employees and has an annual premium flow of $12.3 million. After Jan. 1, policyholders with PBT will be issued new policies in the name of Physicians' Benefits Trust Life Insurance.

Many of the groups now insured by PBT consist of two to five physicians, but some policyholders include large group practices, with as many as a couple dozen physicians as well as their employees.

PBT purchases specific stop-loss insurance from Lloyd's of London syndicates to cover individual claims exceeding $70,000. Aggregate stop-loss coverage also is purchased, which kicks in at 110% of expected claims.

Mr. Mathews says PBT has the largest share -- about 25% -- of the health care market for Illinois physicians who are in small group practices. The number of physicians covered has been growing at roughly 5% to 10% annually.

Mr. Mathews says PBT offers competitive rates, a factor behind its growth. For example, the monthly family premium for indemnity plan coverage with a $1,000 deductible for Chicago-area physicians age 35 through 39 would be $381.

PBT only offers indemnity plan coverage, giving policyholders the ability to choose their provider, which Mr. Mathews says, is what physicians want. No pre-certification of any type is required before treatment and policyholders can go to any provider for treatment.

Generally, PBT pays 80% of reasonable and customary charges. Deductibles range from $150 to $3,000 per person. Each person in a group plan can choose a different deductible level. Policies have a $3 million annual and lifetime limit.

Typically, claims are paid within five to seven days. "Policyholders who call deal with staff personally. There is no mechanized phone answering or voice mail system. This is a personalized operation," he said.

Policies written through PBT provide coverage to dependents up until age 25, which is longer than policies available from many other insurers, he said. In addition, dependents who are attending colleges, universities or professional schools can be covered without an upper age limit.

Part-time physicians as well as student members of the Chicago Medical Society and the Illinois State Medical Society, also can purchase coverage from PBT.

PBT is directed by a nine-member board of directors, six whom are appointed by the Chicago Medical Society and three of whom are appointed by the Illinois State Medical Society. Dr. Arthur R. Peterson, a Chicago family practitioner, is the chairman of the board.