Two of Massachusetts’s largest health insurers just merged into one mega corporation.
Is that a good or bad outcome? That depends on the ultimate effect this amalgamation has on the many Massachusetts residents who pay for premiums issued by this new entity.
Harvard Pilgrim Health Care and Tufts Health Plan now become one of the region’s largest health-services organizations, serving 2.4 million customers.
That makes this new insurer the second largest in the state, just behind Blue Cross Blue Shield of Massachusetts, with 2.8 million subscribers.
“This combination brings together the expertise of two great companies with rich legacies, and strongly preserves nonprofit health insurance coverage in our region,” said Tom Croswell, the former head of Tufts Health Plan and new CEO of the combined organization.
Both company brands will continue in the marketplace for a period of time with the same benefits through 2021, according to an announcement released Monday.
The combined company will relocate to a new headquarters in Canton sometime in the fourth quarter of this year.
The new nonprofit has issued all the right statements expected of a conscientious corporate neighbor. It’s indicated it will immediately focus on the pandemic with an initial investment of $1 million to support education, awareness and outreach related to the coronavirus vaccine, especially in minority communities.
Other key goals include laudable but unspecified commitments to health care access for diverse communities, philanthropy and prioritization of medical and behavioral-health management.
“We are excited and eager to start this journey as one organization with a vision of transforming how health care is accessed, aligning a fragmented system and guiding our members and communities to better health and a better health care experience,” said Michael Carson, 52, the former chief executive of Harvard Pilgrim now serving as president of the new company.
And how would that streamlining of the health care delivery system be achieved?
Finally resorting to details, the merged company indicated that over time, it anticipates more than $100 million in savings through “administrative synergies,” which will go directly to mitigating premium increases and out-of-pocket costs for members.
Those “administrative synergies” include eliminating 125 jobs this year — about 3% of the workforce — through layoffs and attrition.
And, of course, it won’t use its greater market share to charge more for health insurance.
“If our price point isn’t right, then we can basically price ourselves out of the market,’’ said Carson.
But it’s a market that has left health care consumers at a competitive disadvantage, with the removal of one significant insurer option.
Dr. Stuart Altman, chair of the Massachusetts Health Policy Commission, said HPC recognizes the merger could impact total health care spending in the state.
“We expect to monitor the merged company to ensure that it realizes its goals of achieving efficiencies and passing along those savings to the Massachusetts employers and individuals who pay premiums, while improving quality and access to care, particularly for vulnerable and underserved populations,” Altman said.
Although Attorney General Maura Healey’s office allowed this transaction to occur, it issued a statement that the new company should work to expand access to needed health care services and contain costs for consumers.
We don’t doubt that this merger will result in a more efficient delivery of health care. We just don’t believe, minus a sizable competitor, that it comes without a price — either in a reduction of plan choices or an increase in premiums.
Economies of scale work well for large corporations, but not necessarily for consumers unless they benefit from those efficiencies.
It will be up to the state’s Health Policy Commission and the attorney general’s office to ensure that happens.