Massachusetts health insurance companies consider merger
It isn't Valentine's Day yet, but two Massachusetts health insurance companies are already talking about getting hitched. Harvard Pilgrim and Tufts Health Plan have signed an agreement of understanding that they may want to merge. While the agreement is non-binding, it sets into motion the process for the second and third largest insurers in Massachusetts to combine into one larger entity.
Is low cost health insurance on the way?
Supporters of a merger say that it makes sense. Both Harvard Pilgrim and Tufts Health Plan are dwarfed by behemoth Blue Cross Blue Shield of Massachusetts (BCBSM). Even after a merger, the new insurance company would be smaller than BCBSM.
Advocates of the merger say a new, larger health insurance company would be in a better position to compete with BCBSM. Together, the companies could reduce administrative costs and overhead while enjoying the clout that comes from being a bigger player at the bargaining table. The end result? More low cost health insurance options for Massachusetts residents, supporters say.
Consumer groups raise a warning flag
Not so fast, say consumer groups. While a number of smaller companies offer health insurance in Massachusetts, the state is largely served by the three largest insurers. Drop the number of major players down to two, and consumers lose options, according to a report from The Boston Globe.
Along with the loss of options is the loss of competition. For some, less competition can only mean higher health insurance premiums. Critics point to a study on health insurance consolidation completed by The National Bureau of Economic Research in 2009, which found that when two major companies merged, a 7 percent increase in premiums followed.
Hospitals feel the squeeze
Of course, it is not just consumer groups that are a little wary about the merger plans. The Massachusetts Hospital Association appears to have broken out in a cold sweat at the prospect of being strong-armed by two large insurance companies, according to a National Public Radio report.
And they have every right to be nervous. With managed care mandating that patients use in-network hospitals and health care professionals, the power at the negotiating table most certainly swings to the insurance company holding a million prospective patients in its hands.
Independent hospitals that are not part of a larger network are particularly at risk of being backed into a corner. Refuse to cave to an insurer's demands and watch them withhold the coveted 'in-network provider' status from you. After that, bankruptcy court could be just a step away.
As health care costs explode, it's hard to blame businesses for watching the bottom line. Hospitals want to stay in business; health insurance companies want to remain profitable; and consumers…well, consumers just want to find affordable medical insurance that will pay for Johnny's stitches without breaking the bank.
Before the Harvard Pilgrim and Tufts Health Plan merger can proceed, it will need the blessing of the state Attorney General. That review process will hopefully keep its finger on the pulse of both the health care industry and the consumers who depend upon it.Tags : massachusetts health insurance, health plan mergers