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Harvard Pilgrim, Tufts Health Plan Call Off Merger

Harvard Pilgrim Health Care and Tufts Health Plan, the state's second- and third-largest health insurers, respectively, will not be merging, the two companies announced Friday.

The surprising decision comes some five weeks after the insurers announced they were exploring a merger. On Jan. 25, the companies signed a non-binding memorandum of understanding — the first step toward a possible merger. The companies had spelled out who would lead the combined organizations and the new board.

While conducting due diligence, the insurers said it became clear a merger would not have been as financially prudent as first thought.

“We have spent the last six weeks in a vigorous process thoughtfully exploring the practical feasibility of combining our two organizations for the benefit of our customers, members and the many other people we aim to serve," said Harvard Pilgrim CEO Eric Schultz in a statement. "As a result of this process, we have now determined that we are stronger as individual competitors than one company."

Added Tufts Health Plan CEO Jim Roosevelt Jr., "We made the thoughtful determination that while we are in the same business, our operations are very different and, in many important aspects, not fully compatible without significant changes to existing processes and applications."

Roosevelt says it became clear that the organizations' styles and systems were not compatible and that a merger might put their current strengths at risk.

"We have the No. 1- and No. 2-rated companies in the country for quality and customer satisfaction and we don’t want to do anything to jeopardize that," he told WBUR.

The insurers, which combined would have served about 2 million customers, were thought to want to merge to better compete with Blue Cross Blue Shield of Massachusetts, the state's largest health insurer with about 3 million members.

There were mixed reactions to the dissolved merger on Friday with some employers saying they had hoped a combined company could negotiate lower prices and others saying they’re glad the state will continue to have three strong insurance plans.

Earlier:

This program aired on March 4, 2011. The audio for this program is not available.

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