New York HMO buys for-profit insurer in Connecticut

HIP Health Plan of New York says it will remain nonprofit when it buys for-profit ConnectiCare -- at least for now.

By Robert Kazel — Posted July 12, 2004

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The biggest HMO in the New York City area, HIP Health Plan of New York, is setting the stage for a regional expansion by buying a large Connecticut managed care network, ConnectiCare.

HIP, a nonprofit plan with more than 1 million subscribers and more than 22,000 doctors and other medical professionals, announced June 23 that it planned to buy Farmington, Conn.-based ConnectiCare, a privately held insurer. ConnectiCare has 270,000 members and 14,000 physicians and other health care professionals in its networks.

Details of the proposed deal, which is contingent on regulatory approvals, were not released.

ConnectiCare operates in its home state as well as portions of Massachusetts, and in the past two years also has tried to attract businesses in New York's suburbs in Westchester, Rockland, Putnam and Orange counties, said Deborah Hoyt, ConnectiCare spokeswoman.

HIP primarily serves Medicare and Medicaid patients, union members and employees of municipalities, while ConnectiCare is especially strong in the small business market, Hoyt said. So the two payers see their ability to attract plan sponsors as complementary.

"It's good synergy," Hoyt said. "I think we make a good fit. It's not like they're going to just buy ConnectiCare and dismantle it."

After the acquisition, ConnectiCare would continue to operate as a for-profit subsidiary of HIP, which will retain its nonprofit status, Hoyt said. Neither insurer would comment on whether HIP is still interested in transforming into a for-profit, shareholder-owned company. Recent New York state laws facilitate the conversion of any insurer in the state to for-profit status, and earlier this year an HIP executive said the company was strongly interested in converting.

The sale is expected to be completed early in the fall, said Ron Maiorana, senior vice president for public affairs at HIP.

Under new ownership by HIP, ConnectiCare will keep its existing name on its products, and its corporate management, work force and offices will not change, representatives for both companies said. There will be no immediate effects on doctors in either company's networks.

But Tim Norbeck, executive director of the Connecticut State Medical Society, said he was afraid the buyout of ConnectiCare by HIP would add another "layer of bureaucracy" to doctors' jobs in his state and that the new owner would be less responsive to Connecticut physicians.

"My first thought is, 'Just what we need -- another big, out-of-state insurer grabbing onto a small company and making it hard for physicians to communicate,' " he said. "It doesn't help anyone but HIP. It's just very hard to see any good news in this."

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