Harvard Pilgrim rescue plans being studied

Massachusetts regulators are reviewing a variety of proposals for the insurer's bailout. A deal involving a for-profit plan is possible.

By Julie A. Jacob, amednews staff. Feb. 28, 2000.

The fate of Harvard Pilgrim Health Care came one step closer to a resolution on Feb. 11, the date by which potential buyers or investors had to submit their proposals for salvaging the ailing health plan.

But whether Harvard Pilgrim will be able to continue functioning as a nonprofit remains the unanswered question. The health plan, which covers 1.1 million people in Massachusetts and another 100,000 in Maine and New Hampshire, was placed into state receivership Jan. 4 after revealing that its 1999 losses would reach $177 million, a number that has now ballooned to $198 million.

State regulators are reviewing the proposals, said insurance spokesman Christopher Goetcheus. No deadline has been set for deciding which proposal to present to the Massachusetts Supreme Judicial Court, which must approve any bailout plan, he said.

However, State Attorney General Thomas Reilly and Insurance Commissioner Linda Ruthhardt have already rejected a proposal by a coalition of hospitals to give the insurer a surplus note loan. According to local newspaper reports, state regulators opposed the hospital group's request that the state guarantee that Harvard Pilgrim repay the loan.

Massachusetts' hospitals, which are struggling financially and are owed about $265 million by Harvard Pilgrim, needed a guarantee on the loan for the proposal to be viable, said Stephen Weiner, a local health care attorney. "The hospitals are strapped. The [loan] only made sense if there was some sort of backup or guarantee ... but state fiscal concerns are growing, and regulators are resistant to committing to a guarantee."

Now that the hospital proposal has been shelved, the remaining two options are purchase by a for-profit or bailout by a coalition of large employers and Harvard University. The health plan has its roots in Harvard Community Health Plan, founded by the dean of Harvard Medical School.

Although state regulators have not revealed which for-profit health insurers have expressed an interest in Harvard Pilgrim, plans mentioned as possible suitors include Aetna U.S. Healthcare, Anthem Inc., Cigna Healthcare and UnitedHealth Group.

If a for-profit bought Harvard Pilgrim, it would immediately vault that insurer into the position of the second-largest insurer in the state, right behind nonprofit Blue Cross Blue Shield of Massachusetts. So far, for-profit insurers have had little success in cracking Massachusetts' health insurance market, which is dominated by nonprofits: Massachusetts Blues, Harvard Pilgrim, Tufts Health Plan and Fallon Community Health Plan. The Blues is the only plan not reporting losses.

No matter what happens to Harvard Pilgrim, the financial struggles of Harvard Pilgrim, Tufts and state hospitals are forcing state legislators and health care leaders to take a close look at the state's health care system, said Richard Averbuch, the Massachusetts Hospital Assn.'s director of policy communications.

"There is a growing consensus among policymakers, providers and consumer groups to precipitate a serious look so this does not happen again," Averbuch said.