Pacific Mutual Aims to Expand With Piece of HMO : Health care: The state’s largest health insurer seeks ‘cooperative venture’ with Health Net. There has already been a competing bid.

NEWPORT BEACH —  Securing a stake in a health maintenance organization is a logical extension of the products that Pacific Mutual Life Insurance Co. offers its customers, a company official said Monday after news of its negotiations with California’s second-largest HMO became public.

A number of major insurance firms have acquired stakes in HMOs as part of an evolutionary process in providing customers with new products, said Robert G. Haskell, a vice president of the Newport Beach company.

In fact, Pacific Mutual was pursuing several HMOs about four years ago, but the health care industry was bleeding so much red ink that the insurance firm put its plans on the shelf.

Now, however, the largest health insurer based in California is seeking a “cooperative venture” with managers of Health Net in Woodland Hills as the HMO seeks to convert from a nonprofit to a for-profit company, Haskell said.

The insurer isn’t saying exactly what form that cooperative venture would take, but its bid for an interest in the state’s second-largest HMO already has been met with a competing bid from Shamrock Investments, a 4-year-old Los Angeles firm that invests in health-care companies.

Under HMOs, patients are typically assigned to facilities and doctors by the health care provider and have little say in choosing who will treat them. Because medical fees are generally lower with HMOs, patients are encouraged to practice illness prevention.

After 123 years in business, Pacific Mutual, which is also California’s largest life insurer, has found that it must constantly adopt new ideas and arrangements to remain a major player in the industry.

It had, for instance, a unique joint venture several years ago with Mutual Life Insurance Co. of New York. The two companies formed a Fountain Valley firm to administer claims on their respective group health insurance policies. MONY has since stopped offering such policies, Haskell said.

Pacific Mutual also was one of the first insurance companies to set up a statewide preferred provider network of doctors and hospitals, Haskell said. Under such plans, customers can chose a private doctor from a list of participating physicians.

“That is a form of managed care one step away from actual managed care,” Haskell said. “There’s a fine line between an HMO and health insurance. Basically, they both are providing the same service.”

Thomas C. Sutton, Pacific Mutual’s chairman and chief executive, was not available for comment Monday, but when he was promoted two years ago, he made a point of emphasizing the company’s need to continually reshape itself.

“The industry is a little bit too passive,” Sutton said then. “We need to be pro-active in crafting solutions to the problems society faces today. Doing that over the next 10 years is critical.”

The most significant problem the country faced, he said then, was the inability of a large segment of the population to obtain health insurance. The traditional approach--offering it through employers--is not enough, he said. Any new approach insurers take would have to control “exploding” health care costs, he said.

An HMO is one way that Pacific Mutual sees as a way to control costs and provide the lower-cost health plan that families need, Haskell said.

Besides offering life and group health insurance, Pacific Mutual and its subsidiaries provide customers with estate planning, mutual fund investment advice, asset management and other programs.

PACIFIC MUTUAL LIFE INSURANCE CO. With $9.8 billion in assets, Pacific Mutual is not only the state’s largest life insurance firm, but also the largest California-based health insurer, providing group benefits to residents through employers.

Eager to expand its health coverage, the 123-year-old Newport Beach company is in the hunt for a piece of Health Net in Woodland Hills, the state’s second-largest health maintenance organization.

Chief executive: Thomas C. Sutton

Number of employees; 2,303

Assets: $9.8 billion

Additional assets under management: $30.7 billion

Individual life insurance in force: $21.1 billion

Five-Year Performance

(in millions) 1990 1989 1988 1987 1986 Revenue $2,570 $2,344 $2,088 $2,182 $1,796 Net income $28.6 $30.3 NA NA $9.3

Source: Pacific Mutual Life Insurance