Share this article

print logo

HealthNow exits some business in Rochester, Syracuse

HealthNow New York is pulling out of some of the health insurance business in the Rochester and Syracuse markets, after failing to garner enough market share in five years to make the effort profitable.

In its third major change in recent weeks, the Buffalo-based health insurer said Tuesday that it will stop seeking new clients in Central New York for its commercial HMO, preferred provider organization and other "community-rated" plans.

Instead, it now will focus on growing its self-funded and administrative services businesses, in which it merely processes claims and performs other functions for large employers who pay their own employees' claims.

Spokeswoman Karen Merkel-Liberatore said the company had been unable to break the dominance of Rochester-based Excellus Blue Cross and Blue Shield in the two markets. In part, that's because the parent of Blue Cross Blue Shield of Western New York can't use the Blue Cross brand there, where Excellus has exclusive rights to it.

"There's such an overwhelming recognition of Excellus in those markets," said Thomas J. Flynn, Upstate practice leader for Mercer Health & Benefits LLC, a health insurance advisory unit of insurance brokerage Marsh & McLennan Companies.

In addition, those markets also have strong No. 2 competitors, with Rochester-based Preferred Care in that city and New York-based Group Health in Syracuse. Preferred Care was recently acquired by MVP Health Care of Schenectady.

"It does look like HealthNow was really squeezed out of those markets. I don't think they really had a chance to penetrate it," said Micaela Brown, analyst for HealthLeaders-InterStudy, a research firm in Nashville.
As a result, losses in those markets were projected at over $10.1 million by 2007, according to the company's June 2005 strategic plan.

Still, Merkel-Liberatore stressed that HealthNow is not withdrawing completely from the two markets, as some rumors and reports had indicated. Rather, she said, it is "repositioning" to focus on businesses in which it has more flexibility to set prices and tailor products as it needs. That means they're more profitable.

The company also has been successful in its Buffalo and Albany markets with the self-funded and administrative businesses, and Merkel-Liberatore said the trend is for employers to go that route to control their own costs.

"We are simply headed in a new direction," she said. "We are going where the business is and the trend is headed, and that is self-insured."

HealthNow first entered Rochester and Syracuse in 2000, and began actively selling products by late 2001. But its smaller presence there meant it lacked the clout to negotiate contracts with doctors and hospitals without reimbursing them more than officials wanted. At the same time, it struggled to grow membership because it couldn't afford to lower its premiums enough.

Excellus officials weren't surprised by the decision. "New York has a number of regional health plans that are very strong in their traditional markets, but they have found it difficult to make entries into other markets," said spokesman Jim Redmond. "In Rochester, we have been taking care of people since 1935, and there's a home court advantage."

HealthNow currently has 19,500 members in the two markets, with 15,000 of them already in self-insured plans. Merkel-Liberatore said the company will continue to cover those members now in its commercial plans, but will not seek new business.

It will still offer commercial, government, and self-funded products in Western New York, and commercial and Medicare plans in Eastern New York, as well as its self-funded business statewide. It does not participate in most government programs in Central New York.

This is the latest change at Buffalo's dominant insurer, which wants to cut operating costs and medical expenses to compete with national firms likeUnitedHealth Group, WellPoint, Aetna and Cigna Corp. Those firms aren't here now, but are expected to make inroads soon.

The company is offering early retirement incentives to 130 employees, freezing non-essential hiring, raising its own employees' copays, and seeking ways to trim vendor costs. Citing the growth of government benefits through Medicare, it also said it will stop paying for retiree health care for non-union employees, beginning with those who retire after April 1.

And last week it said it was pulling out of Medicaid, Child Health Plus and Family Health Plus programs in Eastern New York after three years of losses.

Those moves are in line with the strategic plan, which lays out a series of initiatives to cut costs and grow revenues by 2007. It calls for growing membership 3.4 percent to 811,000, while boosting the profit margin on underwriting from 3.2 percent to 4 percent.

It also seeks to cut administrative costs to 8 cents of every premium dollar, and save $57.4 million in medical expenses, even while spending millions of dollars on technology, staffing, advertising and consulting.


There are no comments - be the first to comment