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Harvard Pilgrim seeks to expand into Connecticut

Insurer sees federal health care law as chance to grow

Moving closer to building a New England franchise, Harvard Pilgrim Health Care, the second-largest health insurer in Massachusetts, is seeking to enter the Connecticut market.

In an application filed with the Connecticut regulators, the Wellesley-based nonprofit health insurer outlined a plan to set up a subsidiary, Harvard Pilgrim Health Care of Connecticut Inc., to compete in a state dominated by for-profit insurance giants.

Harvard Pilgrim said its experience operating as a nonprofit in Massachusetts, as well as in New Hampshire and Maine, gives it a competitive advantage at a time when the national health care law — requiring almost everyone to buy insurance or pay a penalty — is creating tens of thousands of potential new customers across the region.


"We are an innovative, forward-thinking leader in meeting the challenges of balancing affordable cost and quality care and coverage," the insurer wrote in a business plan it submitted to the Connecticut Division of Insurance. "We have a strong regional presence and our not-for-profit status brings credibility and commitment to the table."

Harvard Pilgrim executives declined to discuss the Connecticut license application Tuesday, noting that they are awaiting approval from state regulators. "We want to be respectful of the regulatory process," said Joan Fallon, its director of community affairs.

The insurer had nearly 1.2 million members in its three New England states as of Sept. 30, according to a financial report posted earlier this month. Harvard Pilgrim earned $19.3 million in the third quarter, down from $37.9 million a year earlier. It was named the nation's top health plan for member satisfaction and quality of care in a September ranking by the National Committee for Quality Assurance, a group that works to boost health care quality.

If it wins approval to do business in Connecticut, Harvard Pilgrim will face off against large commercial insurers, including Anthem Blue Cross Blue Shield, Aetna Inc., Cigna Corp., and United HealthCare Services Inc., all for-profits.


In its home state, Harvard Pilgrim's largest competitors are nonprofits: Boston-based Blue Cross Blue Shield of Massachusetts, Tufts Health Plan of Watertown, and Fallon Community Health Plan of Worcester. Such insurers typically seek to operate on narrower margins than profit-generating institutions.

One insurance industry representative in Connecticut said she looked forward to the competition from Harvard Pilgrim.

"A robust, competitive health care marketplace encourages all parties involved to continuously improve quality, lower costs, and deliver the best value," said Susan G. Millerick, spokeswoman for Aetna, based in Hartford.

"To the extent new players in Connecticut will encourage a vibrant marketplace for the benefit of those who live and work here, we welcome them."

The leading commercial player in Connecticut — Anthem Blue Cross Blue Shield, owned by WellPoint Inc. — has been losing market share over the past year, said Chris Lewis, senior market analyst for the research firm HealthLeaders-InterStudy, based in Nashville.

"Connecticut's all about price, at least in the small group market where a lot of the churn is," Lewis said. "I don't know if anybody can shake up the market share of the entrenched incumbents. But as long as they come in at the right price point, a new entrant can hold its own."

This summer, after the US Supreme Court upheld the national health care overhaul legislation, leaders of Harvard Pilgrim and Tufts, which also operates in Rhode Island, said it offered them a chance to expand their out-of-state businesses and pick up new customers.


They cited the expertise they have developed working in Massachusetts, which has had near-universal health insurance coverage since it passed the 2006 health care law that was the model for President Obama's Affordable Care Act.

"It's a very strong opportunity, especially for regional health plans like ours that are connected to the local markets," Harvard Pilgrim chief executive Eric Schultz said in July.

In particular, insurers want to be ready by Jan. 1, 2014, when most states will launch online marketplaces called exchanges — modeled after the Massachusetts Health Connector — where consumers and businesses can shop and buy health coverage. On the same day, federal subsidies for enrollment in individual insurance plans will begin flowing to states.

"With the exchanges coming, Connecticut is the perfect place for Harvard Pilgrim to follow up on what they're doing in New Hampshire and Maine," said Ric Gross, another analyst at HealthLeaders-InterStudy.

Robert Weisman can be reached at weisman@globe.com.