Obamacare kicks in .... Harvard Pilgrim drops out

Harvard Pilgrim cancels Medicare Advantage plan

Excerpt:

The decision by Wellesley-based Harvard Pilgrim, the state’s second-largest health insurer, was prompted by a freeze in federal reimbursements and a new requirement that insurers offering the kind of product sold by Harvard Pilgrim — a Medicare Advantage private fee for service plan — form a contracted network of doctors who agree to participate for a negotiated amount of money. Under current rules, patients can seek care from any doctor.

“We became concerned by the long-term viability of Medicare Advantage programs in general,’’ said Lynn Bowman, vice president of customer service at Harvard Pilgrim’s office in Quincy. “We know that cuts in Medicare are being used to fund national health care reform. And we also had concerns about our ability to build a network of health care providers that would meet the needs of our seniors.’’

Under Medicare Advantage plans, the federal government pays private health insurers to sell customers over 65 years old enhanced policies, many of which offer prescription drug coverage not covered by standard Medicare. But the US Centers for Medicare and Medicaid Services has been seeking to reduce the amount it pays to private insurers for such programs.

Medicare told Harvard Pilgrim to notify customers that its Medicare Advantage program, known as First Seniority Freedom, was being canceled. In a mailing, the insurer was required to list alternative Medicare Advantage plans, including those offered by its competitors.

Harvard Pilgrim in a second mailing this week will urge customers to switch to a new Medicare Supplement plan it will begin offering in October. Unlike Medicare Advantage, which is overseen by the Centers for Medicare and Medicaid Services, the new Harvard Pilgrim plan will be overseen by the Massachusetts Division of Insurance.

It will be “slightly more expensive’’ than the Medicare Advantage plans, but competitive with supplemental insurance plans offered by rivals such as Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, Bowman said.

She said the Medicare Supplement plan will feature some benefits not covered by the current plan, such as fitness reimbursements, but won’t pay for prescription drugs, which are covered by some versions of the current plan. Instead, seniors can buy separate supplemental drug coverage through a partnership with Coventry Health Care, in Bethesda, Md.

Comment: Not unlike State Farm to exit Florida property insurance

Florida has been hit by several large hurricanes in recent years, leaving property insurers responsible for billions of dollars in claims. The companies have asked regulators in the state for permission to increase premiums to cover future catastrophe risks.

However, the requested rate increases have been large, making coverage very expensive, so regulators have blocked some of them.

In July, State Farm's Florida unit filed for an overall statewide homeowners insurance rate increase of 47.1%. The request was rejected on Jan. 12 by the state Office of Insurance Regulation, the insurer said.

"Faced with steeply declining resources to cover future claims and expenses, State Farm Florida has little choice," Jim Thompson, president of State Farm Florida, said in a written statement. "This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market."

Comment: When the government mandates prices and coverage, companies weigh whether it is a valid business proposition. Obamacare reduces competition and reduces customer choice.