American Specialty Health To Offer First National Insurance Coverage For Complementary Healthcare Benefit Plans Through Acquisition of Western Diversified Life Insurance Company

SAN DIEGO, CA (November 6, 2001) -- American Specialty Health, the nation's innovator in bringing complementary healthcare to millions of Americans, has today become the first national organization positioned to offer fully-insured supplemental complementary healthcare benefit programs directly to employers and health plans. As a result, employers whose health plan does not offer benefit options such as massage therapy, acupuncture, chiropractic, naturopathy, guided imagery or nutritional counseling will be able to purchase those benefits directly.

The ability of American Specialty Health to do this was made possible through its $10 million acquisition of Western Diversified Life Insurance Company. Financing of the transaction was provided by United California Bank. Western Diversified is licensed in Illinois and is admitted in 39 additional states as an insurance carrier to sell health and life insurance.

Currently, American Specialty Health affiliates offer supplemental benefit plans through contracts with health plans in more than 20 states. Additionally, American Specialty Health Plans sells supplemental benefit plans directly to employers in California, where it has been doing so since 1994 under the Company's Knox-Keene license as a specialized healthcare service plan. Western Diversified's licenses will allow American Specialty Health to directly sell fully-insured supplemental group benefit plans in 40 states after regulatory approval of the benefit programs.

It is not uncommon for a healthcare organization or insurance company to acquire insurance licenses through the acquisition of an existing insurance carrier as a faster "road to market" than the process of obtaining new licenses state by state. In the case of this transaction, American Specialty Health has not acquired any health care revenue, business or "covered lives."

"For the first time, American Specialty Health will be able to offer employers in up to 40 states the opportunity to directly purchase complementary healthcare benefits for their employees in much the same way some currently purchase dental and vision coverage,"said George DeVries, president and chief executive officer of American Specialty Health. "Until now, much of this coverage has only been available if offered by a health plan."

Marketing directly to employers is not new to American Specialty Health, which has experience in selling, underwriting and administering a plan in California. Of the 4 million residents in the state who are covered by American Specialty Health, approximately 170,000 of these are the result of their employers directly purchasing supplemental group benefit plans from American Specialty Health. The balance obtained a supplemental benefit plan through their company's medical health plan which, in turn, contracted with American Specialty Health.

American Specialty Health's new insurance company will offer supplemental group benefit plans for acupuncture, massage therapy, chiropractic, naturopathic physician services, guided imagery, nutrition products including vitamins and minerals, and nutritional counseling provided through registered dietitians.

According to DeVries, the core of American Specialty Health's business will remain working with health plans that offer complementary health as a supplemental group benefit plan or part of a basic benefit for their clients. "We will not sell directly to employers who have coverage available to them through a health plan already contracted with American Specialty Health, but we intend to aggressively market to those employers who do not have American Specialty Health coverage available through their health plan," says DeVries.

Consumer demand has turned complementary healthcare into a $30 billion annual market in the United States. "There is a growing interest in complementary health care among employer groups and health plans. In recent years, many health plans have started to offer affinity or discount programs for complementary health care to their members. These programs have allowed these health plans to better understand and learn about complementary health care," he adds. "The acquisition of Western Diversified Life Insurance Company will allow American Specialty Health to help some of these health plans and employer groups to convert affinity discount programs to benefit plans."

Based in San Diego, California, American Specialty Health and its affiliates provide complementary healthcare network administration, affinity discount programs and benefit plan programs to health plans, insurance carriers, employer groups, municipalities and school districts, and trust funds across the nation. Currently, American Specialty Health provides full-risk administration of complementary healthcare benefits for 5.8 million members. American Specialty Health's current annualized revenues are over $100 million, up from $77 million since the Company's national expansion began in 1999. The Company has been awarded full accreditation by URAC for its acupuncture and chiropractic healthcare operations. Further information on American Specialty Health may be obtained by calling 1-800-848-3555.