Since 2010, Eric Schultz has been CEO of Wellesley, Mass.-based Harvard Pilgrim Health Care, one of the largest not-for-profit health insurers in New England with more than 1.2 million covered lives in Connecticut, Maine, Massachusetts and New Hampshire and $2.6 billion in annual revenue. Schultz previously was the CEO of Massachusetts insurer Fallon Health and has held executive roles at Cigna Corp. Schultz also sits on the board of America's Health Insurance Plans. Modern Healthcare reporter Bob Herman recently spoke with Schultz about Harvard Pilgrim's experience with the Obamacare insurance exchanges, emerging profit-sharing ventures between insurers and hospitals, re-entering the Medicare Advantage program, and his views on the expansion of Partners HealthCare in Massachusetts. This is an edited transcript.
Modern Healthcare: What has been your company's experience with the healthcare reform law's exchanges?
Eric Schultz: It varies by state. Payers in Massachusetts have had a number of years of experience working with the Connector exchange and reaching out to consumers. That has generally gone well up until the most recent year when Massachusetts needed to move over to a new computer program that lines up with the requirements of the Affordable Care Act. That has gone really poorly.
It was, frankly, a mess where individuals would come in, think they were purchasing and enrolling in a plan, and the technology was unable to communicate and send the information to the various payers. It was a very frustrating experience for the consumer and for the health plan. To minimize the fallout, a number of individuals were continued on a subsidized plan even though they might not have been eligible for a subsidy, just to keep stability in the marketplace.
The good news is, with good leadership in the past few months, technology support and the chief technology officers of each of the local health plans working together, the enrollment cycle for this fall is going to be much better than what it would have been. It's not perfectly fixed, and it won't be. But we're optimistic that the process will go reasonably well.
MH: What were the margins on your exchange plans? Were you losing money on them?
Schultz: Yes, in Massachusetts anyway. If you look at the financials of Massachusetts' plans, you'll see that it's a very tough financial year. There are a variety of drivers behind that. We have a very aggressive state law setting the minimum medical-loss ratio at 89% for this year. When you pile on top of that the significant administrative cost of going through all the unfortunate Connector issues, you just cannot make a margin.
In New Hampshire and Maine, Harvard Pilgrim is now on the exchange for each of those states effective Jan. 1, and we're excited about that and we'll see how that goes. We've got some very good product options there. Both of those states are very happy about having new options available. In New Hampshire, there was only one option last year through Anthem, based on a narrow network. In Maine, there were a couple of options. So both states will have more options this year. We are not in the Connecticut exchange for this coming year.