Harvard Pilgrim and Tufts Health Plan--the second and third largest health plans in Massachusetts, respectively--are considering a merger to combine operations and make them a stronger competitor to the market leader, Blue Cross Blue Shield of Massachusetts, the Boston Globe reports.
Together, they would have 1.7 million members in Massachusetts, New Hampshire, Maine, and Rhode Island, compared with 2.9 million for Blue Cross Blue Shield.
"At Tufts Health Plan, knowing that healthcare costs are escalating, we have been thinking about how can we, what can we do as an organization to improve access and affordability," Tufts spokeswoman Embry Tautenhan told the Boston Herald.
The two nonprofit insurers signed a memorandum of understanding enabling them to work together over the next few months to assess whether a merger better serves customers and holds down surging healthcare costs.
"This could create a consolidated plan that could create a stronger competitor to Blue Cross and it could create a plan that has stronger leverage than either of them individually in negotiating with providers," said Nancy C. Turnbull, associate dean at the Harvard School of Public Health, notes the Globe.
The united company could share administrative costs and find efficient ways to adopt healthcare reform measures. And as a bigger insurance company, it would be able to better negotiate reimbursement contracts with hospitals and doctors, notes WBUR.
If Harvard Pilgrim and Tufts reach a definitive agreement, as expected, it would trigger a regulatory review by the attorneys general and insurance departments in the states where they operate, as well as the federal Department of Justice. Among the criteria regulators will consider are whether a merger would lessen competition and increase prices for customers.
Although the two plans hope to reduce costs with the merger, a recent study shows otherwise. The National Bureau of Economic Research published an analysis that found premiums increased 7 percent after two big health insurers merged because hospitals banded together and charged more for their procedures, WBUR reports.
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