Within the March edition of the Voice, it was described how HPHC had lost some $197 million in 1999 and as a result was placed under state receivership to avoid bankruptcy. Roughly 25,000 state retirees and employees are members of an HPHC plan. Tens of thousands of retirees and active employees also have HPHC coverage at the local level. All told, HPHC has over 1 million policy holders in Massachusetts.

In early March, Attorney General Thomas Reilly, Governor Paul Cellucci, and Insurance Commissioner Linda Ruthardt made the joint announcement that after a detailed review of HPHC’s financial condition, a plan had been established by which the insurer could be released from state receivership. Attorney General Reilly, who is widely credited with helping to keep the company intact during receivership, was enthusiastic about the future of HPHC, but also pointed out that the state will continue to closely monitor the situation to ensure that consumers are protected.

GIC Contract Continues

Beyond the danger HPHC’s demise would have held for the state’s healthcare consumers as a whole, a larger danger loomed for the thousands of retirees insured under the plan. GIC officials, along with the commissioners of the state’s Group Insurance Commission, found themselves walking a tightrope of sorts in their negotiations with HPHC to set the rates for FY 2001.

Each year the GIC engages in negotiations with each of the insurers that are offered as part of the state’s insurance program. While the general parameters of each plan are established by contract, individual rates, some plan components, and even deductibles are subject to annual negotiations.

This year, HPHC requested and received the largest rate increase of any of the nine plans offered by the GIC. As we reported on page 16, HPHC received a 50.98% increase for its HCFA Medicare plan and a 35.28% increase for the Medicare Supplemental plan.

GIC Executive Director Dolores Mitchell walked a fine line during the negotiation process this year. The longtime head of the GIC is known to be a tough negotiator, who does not shy away from a fight with insurance providers. However, this year she needed to balance the needs of the GIC and its participants against those of the Commonwealth as a whole in negotiating with HPHC.

When the GIC voted in March to allow for the rate increase and extend the contract for one year, Mitchell explained the difficult process to the commissioners. She also noted that the GIC contract was being watched by the private sector employers. “We tried to be as cooperative as we could be in our rates,” said Mitchell. “We also want it to be known that we plan to continue to do business with Harvard Pilgrim.”