Updated Cigna buying QualCare Catino, who will remain CEO, explains deal

The health insurer Cigna will purchase the Piscataway-based health-plan provider QualCare Alliance Networks in a deal the two partners said means growth for QualCare and more jobs for New Jersey.QualCare founder Annette Catino, who will remain chief executive, said, “This is a big deal for New Jersey and for QualCare.”

Lt. Gov. Kim Guadagno came to QualCare Monday morning for the announcement, along with John Wray, senior vice president of Cigna, which now has about a half-million members in New Jersey.

Terms of the deal were not disclosed, but the transaction is expected to close in the first quarter of 2015, following regulatory approvals.

Cigna said the agreement combines Cigna’s portfolio of health-related products and services and national scale with QualCare’s expertise and capabilities in working with hospital systems to drive innovation, affordability and value.

QualCare serves about 200,000 customers in self-funded health plans and has more than 900,000 customer relationships, including network access arrangements for workers’ compensation and other products. It is owned by 16 nonprofit hospitals and physician-hospital organizations, with a clientele that spans health systems, unions, local governments, school boards and other commercial employers.

QualCare has grown by providing self-insured health plans to employers, including a number of New Jersey hospital systems, and Catino said the company needed to partner with an insurer in order to expand by offering insured health plans as well as self-insured products.

“Health care is changing, and there are payer/provider partnerships going all over the country,” Catino said. “We needed the ability to be able to do more of those partnerships, with strong financial backing.”

She said that, as consumers increasingly are making their own health-plan buying decisions — including on the HealthCare.gov site under the Affordable Care Act — QualCare needed to be able to offer insured health plans. She said the deal “really is about growing New Jersey and supporting Cigna in their growth in other parts of the country with a New Jersey infrastructure.”

QualCare now has about 800 employees and Catino said the number will grow through the partnership with Cigna.

“Our plans for growth include launching new health insurance products here in New Jersey,” she said. “But our growth plans also include taking the products that we have built here in New Jersey and replicating them in other parts of the country using our platform.”

Cigna is a Fortune 100 company that does business in all 50 states and operates internationally.

“This will allow New Jersey to have a more competitive (health plan) environment here in the state,” Catino said.

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She said Cigna “is committed to the expertise and the entrepreneurial spirit that we have built here in New Jersey, and would like to replicate that in other parts of the country.”

She said jobs at QualCare in New Jersey will grow, “because we are going to hire significantly in the technology area to be able to replicate what we have done in New Jersey in other parts of the country. This will be very good for technology jobs in New Jersey.”

QualCare provides its network to two insurance companies that sell plans on the ACA’s HealthCare.gov exchange: Health Republic Insurance of New Jersey and Oscar Insurance. Asked if that will continue when QualCare becomes part of Cigna, Catino told NJBIZ, “Yes, absolutely.”

“The era of providers relying on volume of care and illness is over. The future is one of serving local communities and focusing on wellness,” said John K. Lloyd, chairman of the board of QualCare and CEO of Meridian Health. “Today’s decision will ensure QualCare’s success in this changing environment and enhance the value it can bring to its local communities.”

“Cigna’s goal is to deliver affordable health care solutions that provide greater value and better health outcomes and experience for our customers,” said Matt Manders, president of U.S. commercial markets and global health care operations for Cigna. “This acquisition is an example of Cigna’s ongoing commitment to being a partner of choice to health care professionals and hospital systems. It demonstrates our focus on partnering with systems and physician groups to deliver next generation health care models.”

John Wray, senior vice president of network contracting and delivery system collaboration for Cigna, said the deal “is a really unique opportunity for us to expand our ability and understanding of how to work more closely and effectively with the people who actually deliver the care to the customers — hospital and doctors.”

He said that, for years, QualCare has been creating health plans that focus on the quality and efficiency of care, as the health care system moves away from the old fee-for-service model that many experts blame for much of the rising cost of health care over the years in the U.S.

He noted that QualCare was created by several large hospital systems in New Jersey: “So it’s really in their DNA to know how to work with hospital systems. Rather than looking from the outside looking in, hey, have an internal point of view. They have an understanding of how the hospitals themselves do business and that really gives them a perspective that few people have.”

Wray said: “The traditional ways of doing business, where providers of care were more inclined to do more from a volume perspective, is shifting more to a value perspective and QualCare has done that really effectively. And that will enhance Cigna’s ability to do that more effectively with the hospital systems as well.”

He also said consumers are “are looking more and more for choice, personalization and affordability. And on the supply side, the delivery system, the hospitals and the physicians, they are evolving at the same time. They are looking for ways to be more responsive to those demands.”

So what the QualCare merger bring to Cigna is, “It really jump-starts our ability at Cigna to play a convening role between those two interests. We can really bring together the capabilities that we have and the capabilities that are evolving on the delivery system side to meet the demands that the consumers are putting on the market right now.”

He pointed that Cigna has a lot of expertise in areas like pharmacy, behavioral health and consumer engagement, “where individuals are able to take more accountability and control over their own health care decisions.”

Wray said the merger “is a very good thing for New Jersey. We will continue to have QualCare based in New Jersey and we are going to provide opportunities for people outside of the state to capitalize on the talent and capabilities that are housed in New Jersey.”

The deal was welcomed by John Sarno, president of the Employers Association of New Jersey, whose member employers can join a self-insured health plan managed by QualCare, the Affiliated Physicians and Employers Heath Plan.

Sarno said “the synergies of this deal will create great value” for the health plan. “We will have the same great provider network and administrative capacities for New Jersey employers, but we will now have national reach and the resources to consider other options for employers, such as a private health care exchange and other consumer-directed platforms.”

Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, said the deal “has the  potential to be disruptive to the marketplace, but that could be in a positive way.”

She said the institute has seen quality improve with increased transparency, and she said Cigna is a big supporter of the Leapfrog Group, which rates hospitals based on their performance on patient safety, “and that’s a good sign.”

Joel Cantor, director of the Rutgers Center for State Health Policy, said, “This partnership could signal increased competition in New Jersey’s health insurance markets by joining Cigna, a strong national player, with QualCare, a strong local plan.”

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