State insurance regulators Friday signed off on Partners HealthCare System Inc.’s acquisition of Neighborhood Health Plan, a transaction that will put the state’s largest hospital and physicians organization into the health insurance business for the first time.
In its decision memo, the Division of Insurance said it was satisfied that Boston-based Partners — which owns Massachusetts General and Brigham and Women’s hospitals — would not use its insurance license to pursue “aggressive growth” in the market.
“We find that the effect of Partners’ acquisition of [Neighborhood Health Plan] will not be substantially to lessen competition in the health care insurance market in the Commonwealth or tend to create a monopoly,” the insurance division said.
The approval came 13 months after Partners and Neighborhood Health disclosed they had signed a letter of intent to merge. In addition to scrutiny by the insurance division’s legal and financial teams, the review process included decisions by the US Department of Justice and the Federal Trade Commission not to intervene on antitrust grounds, and by the office of state Attorney General Martha Coakley’s office not to challenge the deal.
Nonprofit Neighborhood Health insures more than 240,000 mostly low-income residents across the state. While the Boston insurer is an important player in the market for Medicaid — the government insurance program for low-income residents — it has only about 2 percent of the commercial insurance market, said Massachusetts Insurance Commissioner Joseph G. Murphy.
Neighborhood Health was “created as a way to serve a very important part of the marketplace, the community health centers, and they’re going to continue to serve that market,” Murphy said. “But they’ve indicated they have the intention to expand slightly in the commercial market.”
In an e-mail to employees Friday, Partners chief executive Gary L. Gottlieb said the Neighborhood Health acquisition would take effect Oct. 1. “Our partnership with NHP will help to solidify our strategy of delivering more effective and efficient care to populations of our patients . . . including those patients considered high risk and in need of continuing medical services,” Gottlieb wrote.
Deborah C. Enos, president of Neighborhood Health Plan, e-mailed her staff that “the affiliation will enhance and ensure NHP’s stability for the future, which means the work that we do today in support of our members will continue on.”
Enos said both parties are “committed to serving the health care needs of low-income and vulnerable populations.”
Executives from commercial insurers and competing hospitals have privately warned that Partners could use Neighborhood Health to cement its dominant market position. Since 2009, both the federal Justice Department and the state attorney general’s office have been investigating possible anticompetitive behavior by Partners in the health care market, where its hospitals command some of the state’s highest payments. No charges have been filed.
Murphy, however, said no objections to the Partners alliance with Neighborhood Health were filed with the division or expressed at a public hearing on the deal last month. Noting that about a half dozen health care organizations had bid for Neighborhood Health, he said, “I would hope that if certain people had legitimate concerns, other than self-serving gripes that they were left off the dance card, they would have expressed them.”
Partners will not be the first Massachusetts hospital system to have a health insurance affiliate. Boston Medical Center owns Medicaid managed care plan BMC Health Net, which operates statewide, while Springfield-based Bay State Health holds a majority stake in Health New England, a health maintenance organization. Cambridge Health Alliance last year sold its Medicaid managed care plan Network Health to Tufts Health Plan of Watertown. “It’s not unchartered territory,” Murphy said. “It’s not uncommon to see structures like this in the Massachusetts marketplace.”
Last month, Tufts Medical Center, its physician group, and the for-profit parent company of MetroWest and St. Vincent hospitals were awarded an $88.5 million federal loan to create the nonprofit Minuteman Health Initiative, the state’s only member-owned health insurance plan.