Upping The Ante In Health Care Coverage | Harvard Pilgrim move into Worcester widens employer options
William Conley worries about health insurance.
As director of administrative services at the College of the Holy Cross, he thinks about what rising insurance costs mean to the college’s 1,100 employees. In a typical year, he said, employees’ premiums might rise 10 percent while they get 3 percent raises. That means health insurance is taking up an ever-increasing part of their income.
So Conley is interested in Harvard Pilgrim Health Care’s new push into Central and Western Massachusetts, symbolized by a prominent downtown Worcester office at 427 Main St. that’s scheduled to open this month.
“I would welcome Harvard Pilgrim coming in just to see what they can offer,” Conley said. “If they can lower costs by expanding into the western region.”
Holy Cross already offers a Harvard Pilgrim plan to its employees, along with others from Tufts Health Plan and Fallon Community Health Plan. But Conley said 70 to 75 percent of employees chose Fallon because it’s the least expensive. Most of those who choose Harvard Pilgrim live closer to Boston and want a plan that includes more providers there.
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Kate McEvoy-Zdonczyk, Harvard Pilgrim’s vice president for Central and Western Massachusetts, says the insurer’s move west is about expanding on the 60,000 members it already has in the region. The Worcester office will make it easier to reach out to employers, insurance brokers and providers in the area, and the company will also support local charitable causes and get involved in the community.
McEvoy-Zdonczyk said part of the strategy has to do with the plans the insurer offers. Like most insurance companies, Harvard Pilgrim is increasing its focus on limited network and tiered network products that can reduce costs by directing members to specific providers. Those plans become more appealing the farther west from Boston you go, McEvoy-Zdonczyk said, because the size of the typical employer becomes smaller, and health insurance costs are a much bigger concern for small businesses than large ones.
She said people in Central and Western Massachusetts also have a history of looking at health care in terms of regional markets, which makes it easier to swallow plans that don’t cover all providers equally.
“I think it sort of makes sense conceptually to folks,” she said.
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Another piece of Harvard Pilgrim’s new strategy is McEvoy-Zdonczyk herself. The insurer hired her away from Fallon Community Health Plan earlier this year. She said her position mirrors vice president jobs that Harvard Pilgrim has in New Hampshire and Maine, giving her responsibility for understanding the local markets.
It helps that she’s a “Worcester girl” born and raised.
“You can’t fake it,” McEvoy-Zdonczyk said. “You’re either attuned to that marketplace or you’re not.”
The entire company may be more attuned to Central Massachusetts thanks to the hiring of Eric Schultz as CEO last year. Schultz previously led Fallon Community Health Plan and is well known in the Worcester-area business community.
McEvoy-Zdonczyk touts the new Harvard Pilgrim campaign as a boon to consumers, whom she says will benefit as all insurers are pushed to compete with new, innovative products. Karen Granoff, senior director of managed care at the Massachusetts Hospital Association, agrees that’s a likely benefit.
“I think, in general, competition is probably a good thing for consumers and providers,” Granoff said.
But, she added, it’s probably not such a good thing for Fallon, which is a far smaller organization than Harvard Pilgrim and operates primarily in Central Massachusetts.
At the end of 2010, Harvard Pilgrim had 733,684 members to Fallon’s 183,442, according to state data that includes all company plans plus self-insured and government plans administered by the companies.
Harvard Pilgrim had a net income of $42.9 million on revenue of $1.4 billion for the first half of 2011. During the same period, Fallon earned $23.8 million on revenue of $572 million. In 2010, Harvard Pilgrim’s net income was $49.6 million, while Fallon lost $8.8 million.
Of course, Harvard Pilgrim is competing against other insurers. Blue Cross-Blue Shield is, by far, the biggest player in the state, with more than 2 million members and $3.2 billion in revenues in the first half of 2011. Meanwhile, its net income was $76.5 million. In 2010, it earned $13.4 million on revenues of $6.3 billion.
Tufts Health Plan has 665,586 members, making it the third biggest health insurer in the state. It reported net income of $45.6 million on revenues of $1.4 billion for the first half of 2011, and $64.9 million on revenues of $2.6 billion in 2010.
John Budd, an attorney at Mirick O’Connell in Worcester and a member of Harvard Pilgrim’s board of trustees, said he’s been pushing for the insurer to set up a Worcester office during the 10 years he’s served on the board. He said he does see the move having a possible impact on Fallon.
“I don’t think that’s the reason we’re coming, but of course we’re competitors,” he said.
Budd said the insurance industry is becoming a harder place for small players. Without discussing Fallon in particular, he said he sees insurers going the same way as hospitals, with smaller organizations merging to become more economically viable.
Budd noted that Harvard Pilgrim had been exploring a merger with Tufts earlier this year before deciding in March that the numbers didn’t add up. He said Harvard Pilgrim might look at other deals in the future.
“It’s always possible,” he said. “I can’t rule anything out.”
Fallon isn’t commenting much on Harvard Pilgrim’s plans, but it does say it isn’t worried.
“We welcome the competition,” Fallon spokeswoman Christine Cassidy said. “It makes us a better company for it.”
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