Harvard Pilgrim Health Care and Tufts Health Plan Sign Memorandum of Understanding to Explore Possible Merger

BOSTON--()--Harvard Pilgrim Health Care and Tufts Health Plan today announced they have signed a non-binding Memorandum of Understanding (“MOU”) to explore the benefits of merging their nonprofit health plans. This is the first step in a long process of due diligence for both organizations to internally review the potential for a transaction before reaching a final merger decision, which is anticipated sometime in the next several months. If the companies decide on the terms of a merger, documented by a definitive agreement, a regulatory review process would then take place.

During the MOU period the organizations will explore the potentially significant benefits of a combined regional nonprofit plan that creates value for customers, employers and communities by: ensuring access to high quality health care; enhancing focus on medical outcomes and quality; avoiding duplicate spending on the administrative systems needed to implement government mandates; and creating efficiencies on technology investments – thereby helping to keep health insurance premiums competitive.

These two organizations are the highest ranking health plans in the nation for customer service and quality. As the #1 ranked health plan, Harvard Pilgrim Health Care operates in Massachusetts, Maine and New Hampshire; while Tufts Health Plan, ranked #2, operates in Massachusetts and Rhode Island.

“Harvard Pilgrim Health Care is continually looking for ways to improve quality and control rising costs while serving our members and this is the right time to explore how we might share that goal as a combined organization,” said Eric Schultz, president and chief executive officer of Harvard Pilgrim Health Care. “We feel that a regional health plan will create value for the customers, employers and the communities we serve as well as the broader health care marketplace.”

Both Harvard Pilgrim Health Care and Tufts Health Plan are committed to the communities they serve and each have comprehensive community benefits programs. If the decision is made to combine organizations, the new entity will have an enhanced ability to continue its strong commitment to community benefits.

While stressing that this agreement commences what is likely to be a lengthy examination by their respective management teams and boards of directors, as well as numerous regulatory bodies, James Roosevelt, Jr., president and chief executive officer of Tufts Health Plan, said, “Exploring a merger of two evenly matched, like-minded organizations is a responsible approach in an environment of unsustainable increases in health care costs. There is compelling reason to believe that a combined new organization has great potential to reduce costs, which will contribute to slowing the growth of escalating premiums while increasing the focus on improving health care quality in partnership with providers.”

The boards of directors of both organizations felt it important to reach mutual agreement regarding the leadership positions of a merged entity to evidence their commitment to sincerely exploring the possible transaction. Therefore, the MOU specifies who would hold the top leadership and governance positions in a merged entity. For the first two years, Barry L. Shemin, currently chairman of the Harvard Pilgrim Health Care board of directors, would hold the position of chair of the new board of directors and Davey Scoon, currently chairman of the Tufts Health Plan board of directors, the position of vice chair. Jim Roosevelt would hold the position of chief executive officer and Eric Schultz that of president and chief operating officer. Following the initial two-year period, Roosevelt would move on to executive board chair and Schultz would assume the position of president and chief executive officer.

While the merger is explored, both companies remain strong, respectful and independent competitors, focused on providing their respective members with the high quality health care coverage they have come to expect. The companies do not anticipate any changes for their respective members and customers as a result of these discussions.

Harvard Pilgrim Health Care

Harvard Pilgrim is a not-for-profit health plan that provides a variety of insurance plan options and self-funding arrangements to more than one million members in Massachusetts, New Hampshire and Maine. Harvard Pilgrim was recently ranked the #1 private health plan in America again according to an annual ranking of the nation’s best health plans by the National Committee for Quality Assurance (NCQA).* Harvard Pilgrim is the only private health plan in the nation to be named #1 for member satisfaction and quality of care for seven consecutive years.** In addition, for the second year in a row, Harvard Pilgrim is the highest-ranked health insurance plan in the New England region in the J.D. Power and Associates 2010 National Health Insurance Plan Study.SM ***Harvard Pilgrim provides innovative approaches to health improvement and disease management, unique online tools that speed and simplify key transactions for employers and providers, and personalized health support at www.harvardpilgrim.org.

NCQA’s Health Insurance Plan Rankings 2010-11 – Private** U.S. News/NCQA America’s Best Health Insurance Plans 2005-2009 (annual). America’s Best Health Insurance Plans is a trademark of U.S. News & World Report. NCQA The State of Health Care Quality 2004*** J.D. Power and Associates 2010 National Health Insurance Plan Study SM .examined the member satisfaction performance of 133 health plan companies in 17 geographic regions. The study surveyed Harvard Pilgrim’s members throughout New England, including members in the health plans’ growing suite of consumer-driven health plans. For more information please visit jdpower.com

Tufts Health Plan

Headquartered in Massachusetts, with membership in that state and Rhode Island, Tufts Health Plan, a nonprofit organization, is nationally recognized for its commitment to providing innovative, high-quality health care coverage to its members. The plan supports its members and employers with an array of physician-led health management programs that use evidence-based medicine to design coverage that supports proven approaches to providing care and improving quality. Tufts Health Plan’s HMO and POS are ranked second in the nation, and its Medicare Advantage program is ranked seventh in the nation, by the National Committee for Quality Assurance (NCQA). Since 1999, those products also achieved Excellent accreditation status from NCQA, the highest possible achievement for consumer protection, quality improvement and clinical effectiveness. More information about the organization is available on its Web site www.tuftshealthplan.com.

Contacts

Harvard Pilgrim Health Care
Sharon Torgerson, 617-509-7458
sharon_torgerson@harvardpilgrim.org
or
Tufts Health Plan
Patti Embry-Tautenhan, 617-972-1090
patti_embry-tautenhan@tufts-health.com
or
Rasky Baerlein Strategic Communications
Larry Rasky, 617-443-9933
lrasky@rasky.com

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Contacts

Harvard Pilgrim Health Care
Sharon Torgerson, 617-509-7458
sharon_torgerson@harvardpilgrim.org
or
Tufts Health Plan
Patti Embry-Tautenhan, 617-972-1090
patti_embry-tautenhan@tufts-health.com
or
Rasky Baerlein Strategic Communications
Larry Rasky, 617-443-9933
lrasky@rasky.com