A united Tufts-Harvard Pilgrim is better for consumers, CEOs sayDecember 1, 2019
“We do think there’s an opportunity for us to improve the affordability of the products that we offer,” said Tom Croswell, the chief executive of Tufts. “We can’t control hospital prices or pharmaceutical prices, but we do think we can have a real impact.”
Croswell and Michael Carson, the CEO at Harvard Pilgrim, announced the merger in a news release in August, but they had not spoken about it publicly until a recent interview with the Globe.
The two have also begun meeting with state and federal regulators, whose approval they need for the deal, and health care consumer advocates.
Tufts and Harvard Pilgrim announced the deal just months after Lahey Health and Beth Israel Deaconess Medical Center completed their long-planned merger, creating a big new hospital system to compete with Partners HealthCare.
Croswell and Carson did not detail how they plan to cut costs through their merger.
They acknowledged there would be some layoffs — in total, the companies now employ nearly 4,800 people — but said they haven’t determined who and how many people would lose their jobs. Both companies have begun notifying employees about severance packages.
Regulators are likely to examine how the deal to create a regional health insurance powerhouse would affect health care costs, as well as choice for consumers.
“The argument that many people have made over the course of a long time in health care is that consolidations can create efficiencies that reduce cost,” Governor Charlie Baker — a former CEO of Harvard Pilgrim — recently told the Globe. “It hasn’t really played out that way.”
Even when companies reduce costs by merging, they might not pass those savings on to consumers.
Economists have found that less competition among health insurers tends to raise premiums, said Leemore S. Dafny, an antitrust expert and professor at Harvard Business School.
Harvard Pilgrim and Tufts have close to 1.2 million members each. After the merger, the new company would
still be smaller than Blue Cross Blue Shield of Massachusetts, the largest insurer in the state.
All three are structured as nonprofits but compete with national for-profit insurers such as Aetna, Cigna, and UnitedHealthcare.
Harvard Pilgrim and Tufts executives have tried merging before, including in 2011, but decided not to move forward at the time.
But both companies have evolved since then. Now, for example, a big part of Tufts’ business is covering people who are enrolled in Medicaid, the public program for low-income individuals.
Harvard Pilgrim remains focused on private insurance plans, which it sells to employers, though it has struggled to maintain its membership numbers in recent years. Last year, Harvard Pilgrim was in negotiations to be acquired by Partners, the state’s largest hospital system. Those discussions ended without a deal.
Meanwhile, national for-profit insurance companies are aggressively looking to grow in Massachusetts, increasing the urgency for a merger of two…