Fallon Health, the small Worcester-based insurer, plans to exit the commercial insurance market and focus entirely on government health programs.
The unusual step means Fallon will stop selling private health plans to employers, beginning Thursday. Instead, it will offer coverage for seniors on Medicare, low-income individuals on Medicaid, and people who qualify for subsidized coverage through the state Health Connector.
“We see this is an opportunity to continue to grow in Medicare and Medicaid,” chief executive Richard Burke said. “This is a change that will allow us to focus in those areas where we know there’s a need.”
The commercial health insurance market typically is considered lucrative, but also highly competitive. Fallon’s decision to stop selling private plans signals an acknowledgement of the challenges the company faces in competing with much bigger insurers such as Blue Cross Blue Shield of Massachusetts, the now combined Harvard Pilgrim and Tufts health plans, and national companies including UnitedHealthcare and Aetna.
“There’s a lot of choices in the commercial market,” Burke said.
Fallon has more than 200,000 members, just a fraction of the 2.8 million at Blue Cross and 2.4 million covered by Tufts and Harvard Pilgrim.
Fallon’s business has flipped over the past five years. It has been losing commercial members and adding members on Medicare and Medicaid. In 2016, 62 percent of Fallon’s members were on commercial health plans. In 2020, just one-third had commercial coverage, while the rest were on government health plans.
Fallon said 84 percent of its revenue now comes from government programs.
“Fallon has not being doing well commercially — they’ve been losing membership, they have a small footprint, and they’re facing increasing competition,” said Jon Kingsdale, an associate professor at Boston University School of Public Health. “It is unusual and it is surprising,” he said of the company’s decision to leave the commercial market, “[but] it may be a very clever solution for them.”
Fallon said it would focus on selling Medicare Advantage plans and working with health care providers to manage care for people on MassHealth, the state Medicaid program. Fallon also manages care for people who are covered by both Medicare and Medicaid, including with severel facilities that offer health care for frail elders.
“It’s no secret that we are a smaller health plan,” Burke said. “I think a smaller health plan like ours is more successful in focusing.”
No other Massachusetts insurance company has followed the strategy Fallon is now pursuing. Another Massachusetts insurer, Allways Health Partners, for example, took the opposite approach, shifting away from government programs to grow its commercial membership.