As many of you now know, on August 14th, Harvard Pilgrim Health Care (Harvard Pilgrim) and Tufts Health Plan (Tufts) reached an agreement to combine into a single company that would serve nearly 2.4 million lives in New England. Since the announcement, our team as been working to collect as much information as possible on the pending merger. We did not want to rush to judgement the day of the announcement, and instead have done our due diligence, speaking to carriers and lawmakers alike to get a full picture of what this could mean for our clients and the industry at large. Here is what we’ve uncovered.

Tufts & Harvard Pilgrim merger

 

The Goal

First, what’s in it for the carriers? What are they trying to accomplish? Primarily, they are looking for increased market share and membership. Currently Blue Cross Blue Shield has over 40% of the commercial market in Massachusetts, with 2.8 million subscribers. Tufts and Harvard Pilgrim follow with 12.6% and 12.4% of the market, respectively. By joining forces, the two would still follow behind Blue Cross Blue Shield, but by a much smaller margin. Their new size could allow them greater influence over hospitals, doctors and drug companies.

By expanding its coverage network to five states (CT, MA, RI, NH, ME), Tufts and Harvard Pilgrim will also be in a better position to compete with national providers like Aetna and Humana. Further, Harvard Pilgrim has been experiencing decreased membership numbers over the past few years, and this is their latest attempt, following the proposed merger with Partners HealthCare in 2018, to boost their subscriber base.

The new group plans to offer employer-sponsored plans, Medicare and Medicaid. Tufts, already a big player in the Medicare market, can build upon its footprint in this area. The two carriers have also stated their plans to innovate and use new tools to improve population health quality.

The Patient Experience

CEO of Tufts Health Plan, Tom Croswell, who would lead the unnamed unified organization as CEO, noted four areas that health plan subscribers in New England are currently struggling with:

  1. Affordability
  2. Access
  3. Quality
  4. Continuity (or lackthereof)

Croswell stated that by combining resources, the two carriers will be able to tackle each of these issues.

Will it Pass?

This proposed merger is far from a done deal. While leaders from both Tufts and Harvard Pilgrim have spoken out about their intent to use this partnership to alleviate healthcare costs for consumers in New England, many worry it could have the opposite effect.

Harvard Business School research shows that insurance mergers typically lead to higher premiums, and we know that the Aetna and Prudential merger of 1999 did in fact just that. When it comes to Tufts and Harvard Pilgrim combining, there are major concerns that consumers would be negatively impacted both through costs and the choices offered, which could be lessened as a result of the merger.

Details of the merger must now go through review by the Massachusetts Attorney General, Maura Healey, the Massachusetts Division of Insurance, and federal regulators as well. The state departments will be assessing whether the merger will disrupt access to healthcare for consumers, among other things. Governor Charlie Baker has said that any healthcare merger should result in greater transparency, lower prices and better outcomes for patients, so we do expect regulators to be looking at the full patient experience when considering the deal. Financial terms of the agreement have not yet been released, but those will also be assessed.

I personally don’t see this as an easy approval process or a slam dunk, but if it does pass, here’s what you can expect.

Looking Ahead

I believe that more competition is better for the consumer and with a limited number of carriers that offer health insurance in Massachusetts already, I don’t see how having less options will offer more affordable health coverage for consumers and businesses in the Commonwealth of Massachusetts.  Consumers and businesses will have fewer overall choices of insurance plans and, more than likely, higher rates.  Further, this could result in lower reimbursements to insurance providers, which could reflect in higher costs passed on to the consumer. Also, with these consolidations, there is always a possibility of minor disruptions due to incompatible systems for claims payments and enrollments.

If Harvard Pilgrim and Tufts do go through with the merger, it will be following another major merger in the New England healthcare market – that of Beth Israel Deaconess Medical Center and Lahey Health – which closed in May. This trend toward centralization and rapid expansion is an indicator of healthcare at the national level, where smaller players are finding it nearly impossible to remain profitable. However, there is something to be said for having regional expertise, which Tufts and Harvard Pilgrim could still keep even if combined.

No matter which way things end up, you can be certain that the deal will take 18 to 24 months to be truly approved, finalized and implemented. You can also count on our team at Spring Insurance Group being there to help you every step of the way – deal or no deal – to ensure you still have the best coverage at the best rates available, with minimal interruptions to your business operations.

 

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Jack Sinibaldi

Jack Sinibaldi

John J. Sinibaldi Jr (“Jack”) has worked for over 30 years in the Employee Benefits and Human Resources fields. With experience as an Insurance Consultant, Broker, and Corporate SVP of HR, has seen all spectrum. Currently, Jack is at at Spring Consulting Group, a boutique and widely respected Boston firm. As the Director of Client Services and Practice Leader for Spring Insurance Group, he manages and services thousands of accounts, from the sole practitioners to clients with 40,000 employees nationwide. Prior to Spring, Jack managed a team of client service professionals at Mercer for over five years, handling large national accounts. He was also Senior Vice President of Benefits at Harborside Healthcare Corporation in Massachusetts for 11 years. Jack is adept at organization-wide program administration, benchmarking, budget administration, contract negotiation, employee relations, compensation planning, regulatory compliance, trend analysis and more. He is also a past Chairman for the town of Rehoboth and Halifax Fincom.