Harvard Pilgrim, Tufts Merger Would Reshape Massachusetts Insurance Market

By Leslie Small and Judy Packer-Tursman

Harvard Pilgrim Health Care, Inc. and Tufts Health Plan said Aug. 14 that they intend to merge — a move that industry experts say will give them the scale they need to compete in an ever-more-consolidated health care market.

"There's been massive consolidation in Massachusetts' health systems and health insurance industry, and this is the latest and largest merger — but likely not the last," says Joseph Paduda, a principal with Health Strategy Associates, LLC.

"The Harvard Pilgrim-Tufts deal is just what we should expect in a highly mature industry; scale matters most," Paduda says. "Providers and payers are all moving to build market power in anticipation of the next round of negotiations around reimbursement and related issues."

The desire to compete with Blue Cross Blue Shield of Massachusetts, which dominates the commercial insurance market in the Bay State, is another major factor driving the Harvard Pilgrim-Tufts deal, says Dan Mendelson, founder of the consulting firm Avalere Health.

As for other plans competing in Massachusetts, Rosemarie Day, founder and president of Day Health Strategies LLC, says, "I think it makes things tougher for Fallon [Health] probably." Fallon, though, has "niche" with its a strong regional presence in the central part of the state, "and they have their own clinics [and are] trying to manage costs of care in-house," Day adds.

Both insurers' boards have already unanimously approved the merger, but their press release notes that it is still "subject to multiple local and federal regulatory approvals."

Mendelson says he expects Harvard Pilgrim and Tufs will "have a high hurdle to overcome in getting approval for the transaction."

The approval process will also probably be complicated by the fact that Massachusetts Gov. Charlie Baker (R) once served as CEO of Harvard Pilgrim, he points out.

From Health Plan Weekly