MVP Health Care and Hudson Health Plan announced Friday they have agreed to merge into one company, largely to bolster each other’s organizations within a rapidly changing health care landscape.
The two not-for-profit health plans have operated in the same circles for decades, despite their headquarters being nearly 150 miles apart. MVP, based in Schenectady, and Hudson, based in Tarrytown, began talking about a merger last year.
“This combination brings together two mission-driven, community-oriented companies with similar values,” said MVP President and CEO Denise Gonick in a news release. “We see many synergies and increased growth opportunities, especially in the upcoming Health Benefit Exchange marketplace. We believe that the sum of our combination will be greater than the individual parts.”
Both Gonick and Hudson President and CEO Georgeanne Chapin declined to call the agreement a merger, but Chapin will now report to Gonick under the new structure, though Chapin will retain her title and position at Hudson.
The two entities also will reconfigure their boards, with an MVP board serving as the combined company’s overall board and Hudson’s board acting in an advisory capacity.
Financial terms of the agreement were not disclosed. Company officials said the agreement is awaiting regulatory approval from the state Department of Health. A spokesperson for the department did not return a request for comment Friday.
MVP has 613,000 members across New York, Vermont and New Hampshire enrolled in its health plans, which include self-funded employer health benefits plans, dental insurance, and ancillary products such as flexible-spending accounts.
Hudson has 120,000 members throughout Westchester, Rockland, Orange, Sullivan, Ulster and Dutchess counties enrolled in its state-sponsored plans, which include Medicaid Managed Care, Child Health Plus and Family Health Plus.
“We are looking forward to joining MVP, an outstanding organization, and believe this combination will create many new opportunities for our customers, employees and communities,” Chapin said in the release. “We will now become part of an organization with the critical mass necessary to thrive and grow in the rapidly evolving health care field.”
No significant changes are planned for Hudson’s operations, and it will continue to do business as Hudson Health Plan.
For now, both leaders say not much will change under the merger. They’re putting together a steering committee that will map out plans for integration down the road.
The two companies broached the topic of merging last year, when David Oliker was preparing to leave his post as MVP’s president and CEO. He and Chapin were friends for many years, as MVP long had a presence selling group insurance in the Hudson Valley. One day last year, he called her to set up a meeting.
“We all met shortly after that, just to talk about what this might look like,” Chapin said. “We started by getting our respective law firms on board, talking about details with our respective boards, and it just became clear that this would be in the interest of both organizations. But we knew it would take a while because there were a lot of moving parts to put together.”
For the past year, MVP has attempted to keep its health plans affordable by instituting company-wide layoffs. Since May 2012, there have been 116 layoffs, with more than half of them occurring at its Schenectady headquarters at 625 State St. In addition, 63 employees took early retirements and MVP eliminated 191⁄2 vacancies through attrition. MVP now employs about 1,500.
Hudson Health Plan, which employs 330 at four downstate locations, has had its own challenges, as well.
“I think we saw that with Hudson being a relatively small insurer, we saw that by combining forces with MVP we would be able to grow our Medicare business and participate in exchange activities that, on our own, we probably would not have had the resources to do,” said Chapin.
More than 1 million New Yorkers are expected to enroll in the state’s health benefit exchange, which launches Oct. 1 and will provide an online marketplace for individuals to compare and shop for coverage before January 2014. The exchange has put pressure on smaller insurers, which will be competing with large insurers that offer more comprehensive coverage and benefits.
By combining, MVP expects to benefit from Hudson’s expertise in community-based individual enrollment and Hudson expects to benefit from MVP’s diversity of plans.
“Size and diversity of offerings are important for health plans in the new world of the health insurance marketplaces,” said Chapin. “A 55-year-old person would like to join a health plan that can continue to cover him when he turns 65. Likewise, if someone is no longer eligible for Medicaid, she might prefer to buy a commercial product from that same insurer. “Together, MVP and Hudson now can cover people through all of life’s stages and changing needs.”