🔒Amid major consolidation, small insurers look for an edge

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Only a year after entering the Connecticut market, Massachusetts health insurer Harvard Pilgrim Health Care said last week it surpassed 10,000 members in the state and is bullish about its future growth prospects.

The timing of the announcement didn't go unnoticed: It came as the state's and country's largest health insurers planned and executed multi-billion dollar mergers that could potentially reshape the competitive landscape in Connecticut and other states.

As the big boys join forces, Connecticut's smaller, local and regional insurers say they are confident they will still be able to compete and they're touting their recent growth as evidence of customer demand for their products and services. They're also flaunting their customer-centric focus, attention to detail and not-for-profit business models as ways they can differentiate themselves.

“The eyes of the company are in Connecticut as our primary growth market,” said Jason Madrak, Connecticut vice president for Harvard Pilgrim, which began selling health plans in the state in 2014. “Our customers tend to like what they see.”

Larger health insurance companies have long-dominated Connecticut's market, which has been considered relatively competitive in recent years. Seven major insurers sell health plans in the state, but Anthem Blue Cross and Blue Shield by far owns the biggest market share with 1.1 million members, according to Hartford Business Journal's Book of Lists. UnitedHealthcare has the second largest market share with 470,000 members.

The current merger frenzy that has begun to take hold, however, will give the larger companies several marketplace advantages. Consolidation, for example, reduces competition, giving larger insurers greater negotiating power with customers and health providers. They also can use their scale to cut costs and add new products and services.

Aetna's proposed $37 billion purchase of Humana will give the Hartford insurer a larger footprint in the Medicare Advantage market. Humana doesn't sell individual or small group health plans in the state, but it does peddle dental and supplemental Medicare policies. If Anthem and Cigna join forces — they've been negotiating a potential merger for months — it will further strengthen Anthem's stranglehold in Connecticut.

That has state insurance regulators taking notice.

Connecticut Insurance Department spokeswoman Donna Tommelleo said her agency will review any merger or acquisition of a Connecticut insurance company to determine if it will substantially reduce competition in the state or create a monopoly.

The Federal Trade Commission and U.S. Department of Justice Antitrust Division will also review if the deals have an anti-competitive effect, she said.

Finding an edge

But being small and nimble will have its advantages, too, Madrak said. The key for smaller insurers to survive and even thrive is to be more responsive to customers' needs and wants, executives say.

That's why Harvard Pilgrim uses a “people and presence” approach, putting its Connecticut sales force on the ground to provide enrollees more personalized service. That also establishes stronger relationships with doctors and hospitals, he said.

“You will see a real difference between our ability to reach out to people and get responses quickly,” Madrak said.

One key way Harvard Pilgrim and another new Connecticut insurer — Wallingford-based HealthyCT — differentiate themselves is through their not-for-profit business model.

Since neither company has to pay or satisfy shareholders their profits are reinvested in the company to add new programs and services or stabilize and possibly lower insurance premiums.

“HealthyCT wouldn't be here — or have more than 30,000 members — if our physician founders, our employees and our members didn't think there was a need, and a place for, an alternative to the big insurance companies,” said HealthyCT CEO Ken Lalime. “We'd like to think this would still be the case if the 'bigs' are ultimately allowed to get bigger.”

HealthyCT also sees its local approach as an advantage, because it makes all of its medical and behavioral health decisions in Connecticut.

HealthyCT is sponsored by physicians and, unlike larger companies, offers one network of providers for all its members, Lalime said. The company's physician background enables it to incorporate more policies with input from providers and members that help with convenience, such as allowing patients to purchase 90-day prescriptions from a local pharmacy instead of mail-order.

Lalime said HealthyCT will wait until after the dust settles to see how the major consolidations impact the market, but the company still is focused on growing its Connecticut market share.

Harvard Pilgrim has operations in Massachusetts, Maine and New Hampshire, but its primary opportunity for revenue growth remains in Connecticut, despite the large insurer mergers, Madrak said.

The company's goal is to sign up 13,000 new members a year, Madrak said.

During its first year in Connecticut, Harvard Pilgrim was focused on the commercial market. The company soon plans to expand into the individual and Medicare markets, opening up new pools of business and enabling the company to steepen its growth curve, Madrak said.

“As we see these transactions between companies like Aetna and Humana … Harvard Pilgrim remains extremely committed to New England and growing in Connecticut,” Madrak said.