Less than six weeks after announcing plans to explore a merger, Harvard Pilgrim Healthcare and Tufts Health Plan have announced they will not pursue the idea any further.
"We have spent the last six weeks in a vigorous process thoughtfully exploring the practical feasibility of combining our two organizations for the benefit of our customers, members and the many other people we aim to serve. As a result of this process, we have now determined that we are stronger as individual competitors than one company," said Eric Schultz, president and CEO of Harvard Pilgrim.
[See also: Harvard Pilgrim, Tufts Health Plan eye merger; Harvard Pilgrim heads NCQA list of top private health plans ]
According to officials of the two Massachusetts-based, non-profit health plans, the sticking point in a proposed merger would be the amount of operational and administrative efficiencies and savings a combined health plan could deliver.
"We made the thoughtful determination that while we are in the same business, our operations are very different and, in many important aspects, not fully compatible without significant changes to existing processes and applications," said James Roosevelt Jr., president and CEO of Tufts. "Based on the information we have received in the due diligence process, we now believe this decision is in the best interest of those we serve: our members and customers."
Even if Harvard and Tufts had combined, the joining of the second and third largest health plans in the commonwealth would not have made it the dominant player. Blue Cross Blue Shield is by far the dominant insurer in Massachusetts, with more than 2.9 million members – roughly one out of every two people with private health insurance. Combined, Harvard Pilgrim and Tufts provide coverage for 1.8 million members.
While industry experts lauded the planned merger as a way to provide a more formidable competitor to Blue Cross Blue Shield in terms of both pricing and negotiating favorable reimbursement rates with hospitals and large provider groups, it's likely neither plan has lost much leverage.
But a healthcare reform bill proposed recently by Gov. Deval Patrick might do that work for health plans. A key component of the bill is strict price controls on hospitals and other providers aimed at keeping spiraling costs in check. In this case, the clout a large plan would have in negotiating with large provider networks by leveraging its member base would be moot in the face of government pricing oversight.