Tufts Health Faces Enrollment Test
10/27/2005
Come January, employees at Smith College will receive their health insurance coverage from a new company, Harvard Pilgrim Health Care. For about seven years, the Northampton liberal arts school for women has offered insurance from Tufts Health Plan.
Of 1,300 employees, about half who sign up will also see a more unusual change -- a decrease in their monthly premiums. The college said Harvard Pilgrim's rates were 5 percent lower than a comparable benefits package offered by Tufts.
''Everybody is concerned about escalating costs," said Ruth Constantine, Smith's vice president for finance and administration.
Like Smith, many employers throughout Massachusetts are gearing up for open enrollment, the time of year when they declare their healthcare options for the next year and employees choose their coverage. The process is expected to be difficult for Tufts, the third-largest of the state's major nonprofit health insurers, which has seen a precipitous decline in membership over the past three years. Harvard Pilgrim and Blue Cross Blue Shield of Massachusetts are predicting solid membership gains.
The annual open enrollment ritual is more important than ever this year. James Roosevelt, Tufts' chief executive, has promised to turn around the ailing insurer through tighter controls on costs and by introducing innovative products. He said Tufts' enrollment will bottom out in 2006 and begin to grow. At the same time, Massachusetts employers are burdened by five years of healthcare cost increases that have averaged at least 10 percent, according to several studies. They are putting pressure on Tufts and other health insurers to limit further price increases.
''There's a general reluctance among employers to blindly accept increases without exploring what ever else can be done to mitigate the level of increase to both the organization and its employees," said Peter Kilmartin, a principal at Mercer Human Resources Consulting in Boston, which advises employers on choosing health plans. Those changes, he said, include reducing benefits, requiring higher out-of-pocket payments by employees, switching health plans, and introducing programs to promote health among workers.
Smith College wasn't only concerned about its rates for this year. Constantine said the school also considers a health plan's ability to keep rates from fluctuating too much.
''Employers need consistency in health pricing," she said. ''A bad sign would be a 25 percent increase one year followed by an decrease, and than another increase the year after that."
That factored into the decision to choose Harvard Pilgrim over Tufts, Constantine said. The enrollment period for next year's coverage will start Nov. 10, she said.
Roosevelt, who took over in June as Tufts' chief executive, said he is in the middle of an 18 month turnaround plan. He said that after January, membership will be lower than its current 650,000, but would not predict how many members the plan would lose. In 2007, membership will begin to grow again, Roosevelt said.
Some accounts leaving Tufts are paying rates that don't cover the insurer's costs to provide healthcare, he said. ''As part of this turnaround, I'm not going to do anything that would be irresponsible, like offering a premium that does not cover costs," Roosevelt said.
In addition, Tufts has had some significant wins recently, he said. For instance, Eastern Bank of Boston offered employees a choice of several health plans, while a bank it acquired offered employees only Blue Cross coverage. In 2006, Eastern will consolidate its healthcare offerings and Tufts will be the sole insurer for the bank's 1,750 employees.
''Decisions like this come down to two questions -- service and price," said Joe Bartolotta, a bank spokesman. ''The service of all three plans is pretty good. This time around, Tufts offered us the best price."
But Children's Hospital of Boston has decided to switch from Tufts to Blue Cross Blue Shield of Massachusetts, by far the largest insurer in the state with about 2.8 million members. Tufts is currently the sole provider for the hospital's 5,000 members.
''Over the past five years, we've had relationships with all three health insurers," said Michelle Davis, vice president for marketing and public affairs. ''It's always a tough decision. It comes down to price, network and the ability to process claims."
A Blue Cross spokesman, Chris Murphy, said the insurer expects to add more members through the current enrollment period, bringing membership to 2.93 million at the end of January.
Vincent Capozzi, senior vice president of sales and marketing at Harvard Pilgrim, said he expects membership growth in Massachusetts, New Hampshire, and Maine. ''We've already hit our annual targets and our membership is just under 900,000," he said. ''In January, I'd look for anywhere from a 2 percent to a 4 percent bump."
BJ's Wholesale Club of Natick Inc. of Natick, which operates buying-club stores in 16 states, represents a major gain for Harvard Pilgrim. This year, it offered employees Tufts insurance. ''In switching to Harvard Pilgrim, our team members will experience a smaller increase in premiums than with our existing provider," said Amy Russ, a spokeswoman. Harvard Pilgrim will offer coverage for BJ's employees in Massachusetts, Maine and New Hampshire.
Jeffrey Krasner can be reached at krasner@globe.com.