I don't know what you mean by "specialized product line" but how do Group Health, Blue Cross and others manage to make a go of things here in the northwest? I'm not aware of any great drama with respect to their businesses. Premiums are going up about 10% or so but that's it.
OR and WA have pretty high state mandates (compared to the rest of the country) that require insurance companies to cover more voluntary and cosmetic procedures(read elective, and for things like acupuncture, I shit you not) that makes it harder to price basic medical care in a range that can reach those types of employees. The average $8-$15 temp or cleaning lady at a hotel can't afford the full package major med plans, and most companies that employ alot of folks like that can't afford to contribute enough to pay for it for them. Hence, true basic healthcare and most importantly AFFORDABLE insurance programs can't be sold. It's more of an all or nothing strategy in those states. You either work for an employer that can pay and provide enough benefits to cover you on a full major med, or you get nothing.
Again, those 5 states just make it the hardest for competition to occur or to provide a service to a demographic that needs it. I get several calls a week from small to medium companies that just try desperately to offer some type of health insurance to their low wage employees but have no option but to go broke providing them and not offer anything at all but AFLAC and other supplemental plans that aren't even health insurance. Don't get me wrong, those products are great for what they are designed to do: help replace some out of pocket expenses. But health insurance they are not.