Tufts Health Plan was a pioneer of the HMO, but the health insurance concept that revolutionized an industry and helped hold down costs now represents the smallest portion of Tufts' overall membership in the firm's 27-year history.
The insurer said pricing disparities and a move by employers toward national insurance coverage can be blamed for much of the drop. Other observers say the decline represents continued rebellion against a concept that cut costs by limiting patient choice to a defined network of providers. Choice, they say, continues to win out over price, which will increasingly marginalize traditional HMO plans.
"In spite of the fact that costs continue to rise at double-digit levels, choice has clearly prevailed as an area of attraction from a product perspective," said Philip Litos, president of the Bostonian Group, which advises businesses on health care plan options.
HMO membership at the other two of the state's largest health insurance providers, Harvard Pilgrim Health Care and Blue Cross Blue Shield of Massachusetts, has remained relatively stable.
Of Tufts' 605,000 members as of June, only 240,000 are enrolled in an HMO plan, according to research compiled by the Boston Business Journal in this week's list of the area's largest HMOs -- a 17 percent decline in Tufts HMO membership from 2005 and a 35 percent decline in since 2004.
Total membership in all Tufts Health Plan products has declined 13 percent since it had 698,000 members in 2004. Tufts membership surpassed 1 million people in the late 1990s, most of whom subscribed to HMO-related products.
Brian Pagliaro, Tufts' vice president of sales and client services, said HMO membership declined over the past two years because the insurer's HMO product was more expensive than the competitors' products, a condition he said has since been corrected by negotiating better reimbursement rates with providers.
Pagliaro also blamed losses on internal trends as customers sought more choice, switching, for example, to preferred provider organization (PPO) products, where a provider network exists but consumers can still go to any doctor they wish if they're willing to pay more. Still others, Pagliaro added, have switched to Tufts' consumer-driven health plans, which offer high-deductible coverage at lower premiums and switch more costs to consumers.
Businesses seeking to control double-digit health insurance premium hikes are switching to consumer-driven plans and limiting HMO growth as a result, Litos said, but they're doing so at a slower rate in Massachusetts than the rest of the country as consumers here resist the change.
Tufts, Pagliaro added, expects to reverse HMO and overall membership declines thanks to new technologies and product launches.
The company's CareLink product, for example -- offering national coverage to local or regional companies based on a national alliance with Cigna HealthCare -- has reached 20,000 members this year.
Its Navigator plan, a PPO that charges less for hospitals determined to have better quality and cost rankings, has grown to 83,000 members. Both products were launched in the past two years.
But Pagliaro acknowledges that HMO membership is now a much smaller part of Tufts' overall business, though he said that's in large part because a lot of the other products didn't exist even a few years ago.
"It was an all-HMO market at one time," he said.
Harvard Pilgrim Health Care, the state's second-largest health plan, saw its HMO membership in Massachusetts, New Hampshire and Maine drop by 1.4 percent, to 618,917 members from 627,419 in 2004. That's out of an overall membership that has grown to 960,000 in June, thanks in part to a national alliance with UnitedHealthCare.
Blue Cross Blue Shield of Massachusetts, the state's largest health insurer, reported more than 1.4 million HMO members in 2005 out of 2.9 million overall members, about the same level as in 2004.