Harvard Pilgrim drops its Medicare Advantage plan

Harvard Pilgrim Health Care, Massachusetts' second largest health insurer, is dropping its Medicare Advantage health insurance program at the end of the year. The decision affects 22,000 senior citizens in Massachusetts, New Hampshire and Maine.

Instead, the insurer is urging the affected First Seniority customers to switch to a new Medicare Supplement plan overseen by the Massachusetts Division of Insurance. The supplement plan will be slightly more expensive than Medicare Advantage plans, but competitive with supplemental insurance plans offered by rivals. It also will feature some benefits not covered by the current plan, such as fitness reimbursements, but will not pay for prescription drugs, according to the Boston Globe.

The decision was prompted by a freeze in federal reimbursements and a new requirement that insurers offering a Medicare Advantage private fee for service plan (PFFS) form a contracted network of doctors who agree to participate for a negotiated amount of money. "We became concerned by the long-term viability of Medicare Advantage programs in general," Lynn Bowman, vice president of customer service at Harvard Pilgrim, told the Globe. "And we also had concerns about our ability to build a network of healthcare providers that would meet the needs of our seniors," she said.

However, Harvard Pilgrim's decision is not based on the federal health reform law, notes the Incidental Economist. It's due to the Medicare Improvements for Patients and Providers Act of 2008, which rescinds the PFFS provider network exemption in areas with at least two local network plans. "That means that just about anywhere HMOs and PPOs exist, PFFS plans as we now know them cannot," notes the Incidental Economist.

To satisfy the 2008 legislation, Harvard Pilgrim would have to to completely restructure its Medicare Advantage plan by creating networks of hospitals and doctors as well as reporting on the quality of care they offered, and providing a prescription drug benefit, according to Health Beat. "If we wanted to continue with First Seniority, we would have to turn it into an HMO with a 'network' of physicians and negotiate contracts with them," Harvard Pilgrim CEO Eric Schultz told Health Beat. "Rather than paying fees for each service, we would begin paying them a fixed lump sum to care for each customer over the course of a year," he said.

To learn more:
- read the Boston Globe article
- read the Incidental Economist article
- read the Health Beat article

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