What a Tufts Harvard Pilgrim merger could mean
Last evening it was revealed that Harvard Pilgrim Healthcare and Tufts Health Plan, the number two and number three health plans in Massachusetts, are in serious merger conversations. The merger of Harvard with 1 million total members and Tufts with approximately 750,000 total members, would significantly change the health insurance landscape in Massachusetts and would be created primarily to compete with Blue Cross and Blue Shield of Massachusetts, the state’s largest health insurer with over 3 million members.
Unlike typical corporate mergers where consumers may benefit from the consolidation of administrative components of the new combined entity, customers should expect little in the way of fixed costs savings given that both organizations operate today at about a 10% total administrative expense, quite low for this type of industry as compared to their for profit competitors. However the merger of these two organizations will provide much more leverage with providers, allowing them to effectively negotiate with Partners and other large hospital plans in the state, where 90% of health care premiums are developed. This could add real value to customers.
If history is any indicator, customers should expect to maintain their current administrative and customer service teams and remain on separate platforms for several years post merger. Merging administrative platforms and rolling one group into another can be cumbersome, so expect the merger to focus on provider contracting in the early years. It will be interesting to see how the state regulatory agencies including the division of insurance and the governor’s office react to this news.
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