Updated on 2/1: After an outcry, the GIC has voted to restore the three health insurers.

Original post:

A decision about health coverage for many government employees and retirees is shaking the Massachusetts health insurance industry. Harvard Pilgrim Health Care, Tufts Health Plan and Fallon Health, which are the second-, third- and fourth-largest insurers in the state, have been dropped by the state Group Insurance Commission (GIC), which manages coverage for 442,000 members.

About half of those members have a Harvard Pilgrim, Tufts or Fallon plan, and will need to chose new insurance coverage for July 1. Their options, for the next three to five years, will be: Unicare, a for-profit, Indiana-based company; Neighborhood Health Plan, which is owned by Partners HealthCare; and the Springfield-based HMO, Health New England.

The GIC says moving members to a more limited, less expensive number of insurance plans will save the state $20.8 million in the next fiscal year with little disruption.

In an email, Commissioner Roberta Herman said "the GIC is making these changes to provide the greatest benefits to the GIC and its members." The message goes on to offer this assurance, in bold letters:

"Members will not experience a loss in health care coverage and the GIC’s goal is for members to keep their current physicians and hospitals with comparable coverage and benefits after plan migration," Herman said.

The GIC says it's been talking to insurers about the need to simplify, streamline and save money for more than a year, so Thursday's 8-5 commission vote should not be a surprise. But dropping three prominent, nonprofit Massachusetts insurers is a major blow. Harvard Pilgrim and Tufts say they will each lose roughly 90,000 members, and for Fallon, the loss would be 19,800.

Harvard Pilgrim said in a statement that it is disappointed by the GIC's decision:

It has been our honor and privilege to serve the employees and retirees of the state of Massachusetts for many years. The Harvard Pilgrim team will work with the GIC to ensure a smooth transition for the members we have served so proudly while we continue to introduce innovative products, programs and services to grow our business in Massachusetts, Maine, New Hampshire, Connecticut and throughout the country.

Tufts Health Plan will continue to offer a Medicare Advantage plan to GIC members.

CEO Tom Croswell said Tufts failed to make the contract cut by one-tenth of a point within the GIC scoring system.

"We are extremely proud of the work we have achieved with the GIC during the course of our more than 30-year history. We feel strongly that our response to the GIC's procurement process was extremely strong," Croswell said.

Fallon pledged to "do whatever we can to minimize disruptions for our current GIC members," according to a statement from a spokesperson.

Neighborhood Health Plan, which has struggled in recent years, could be a major winner if it's able to pick up many of the Boston-area members currently covered by Harvard Pilgrim or Tufts.

NHP has been shifting from a primarily Medicaid managed care plan to a focus on commercial insurance. Winning this contract with the GIC could cement that transition. Some industry analysts worry that as NHP grows, Partners will become a dominant player in health insurance as well as the hospital sector.

The GIC plans to hold a series of meetings around the state to explain the changes which are already drawing some criticism.

“Time and again, the Group Insurance Commission has voted to make workers bear the brunt of out of control health care costs, instead of tackling the crisis with providers," said Peter MacKinnon, president of SEIU Local 509. "It is evident that the GIC has taken a bad situation and made it far worse with this anti-consumer vote."