In an apparent effort to win favor with their political constituencies, regulators in Massachusetts and New Hampshire are making it uncomfortable for two health plans that want to drop their Medicare HMOs in the states.
In Massachusetts, the target of Attorney General Thomas Reilly's ire is Oakland, Calif.-based Kaiser Permanente, which is transferring its Massachusetts enrollees to another health plan as part of an overall exit from the northeast region of the country.
Kaiser's Massachusetts plan has 87,000 enrollees, including about 6,000 Medicare beneficiaries.
Kaiser has arranged to let its Massachusetts enrollees transfer to Health New England in Springfield, Mass., an 81,000-enrollee HMO co-owned by Springfield's Baystate Health System and Harvard Pilgrim Health Care, a 1.3 million-enrollee HMO based in Brookline, Mass. No significant money is changing hands, and enrollees can go elsewhere, according to Kaiser officials.
However, Harvard Pilgrim is getting out of the Medicare HMO business itself in western Massachusetts, which will force Kaiser's 6,000 Medicare beneficiaries and Health New England's 3,500 Medicare beneficiaries there to find other managed-care coverage. No other Medicare HMOs are active in the counties Kaiser and Health New England are exiting.
All that has angered seniors and consumer advocates, prompting the state to explore its legal options.
In an Aug. 12 letter to Kaiser's Boston attorney, which Reilly's office released to the media, the attorney general said he wants to ensure that Kaiser enrollees in the state are protected and state laws are enforced "fairly and completely."
Reilly said his department will review whether Kaiser violated any charity laws through its planned transfer of not-for-profit assets to for-profit Health New England. The department also will review the antitrust implications of the transfer, which would give Health New England a large share of the market in western Massachusetts.
Reilly said Kaiser had not given the state Division of Insurance adequate notice of its Dec. 31 exit from the Medicare HMO business. He said he would have asked Kaiser to stay longer if it had not complied with all applicable insurance laws.
Chris Goetcheus, a spokesman for Insurance Commissioner Linda Ruthardt, said HCFA has sole authority over Medicare-risk market exits. "We don't have the authority to compel a Medicare HMO to remain in a geographic area that it serves," Goetcheus said.
Tim Riley, a spokesman for Kaiser's Latham, N.Y.-based Northeast division, said that no charitable assets are changing hands and the organization is still deciding how to respond to the attorney general's letter. He said the letter contained "a number of inaccuracies," but he declined to elaborate.
James Kessler, Health New England's general counsel, said his company is cooperating with the attorney general and hopes to answer Reilly's concerns soon.
Meanwhile, a similar public relations battle is unfolding next door. Cigna Healthsource New Hampshire announced in July that it would drop its Medicare HMO in the state on Dec. 31. Cigna Healthsource, based in Hooksett, N.H., has about 14,000 Medicare beneficiaries in its Healthsource for Seniors plan.
The health plan attributed its upcoming departure to inadequate reimbursement rates and regulatory burdens, but also said it was unable to guarantee an appropriate provider network for Healthsource for Seniors in time to meet HCFA's July 1 deadline.
Lindsay Shearer, a Cigna Healthsource spokeswoman, said the health plan is negotiating with its current providers but has been unable to line up an adequate network for next year.
New Hampshire Insurance Commissioner Paula Rogers objected, noting that when Cigna HealthCare acquired Healthsource in June 1997, it promised not to cut any existing coverage in the state before July 1, 2000.
At the request of Rogers' department and other state officials, HCFA gave Healthsource until Sept. 1 to form its Medicare-risk provider network for the year 2000, Rogers said in a written statement. It's unclear what will happen if the health plan's contract negotiations with providers fail.
The deadline extension gave Cigna Healthsource breathing room to deal with balky providers, and the company is focusing its efforts on those negotiations. "It bought us a little more time," Shearer said.