What to know about Independent Health's affiliation with Albany-area insurer

Independent Health may not be fully independent for much longer, after the Amherst insurer announced Tuesday it “will join” MVP Health Care’s family of companies through an affiliation.

In affiliation, Independent Health to join Schenectady's MVP Health Care

Amherst-based Independent Health will join with MVP Health Care, based in Schenectady.

While there are a lot of details that need to be ironed out in the months ahead as the deal moves through the regulatory approval process, the partnership between Independent Health and MVP is a big deal in Western New York’s health care scene.

Here’s what to know about the affiliation, how it came together and what it means going forward:

The exact structure of the deal is unclear. MVP Health Care CEO Chris Del Vecchio stated MVP is not acquiring Independent Health, and no cash is exchanging hands between the organizations.

He did confirm, however, that Independent Health will exist as an affiliated company underneath the umbrella of a yet-to-be-defined parent organization. Those details are being worked out as part of the regulatory approval process.

It will take about six months to get regulatory approval. Prior to that approval, Independent Health and MVP will continue to operate independently of each other.

“If approved, (Independent Health President and CEO Dr. Michael W. Cropp) will have his team reporting to him in Buffalo, and Dr. Cropp and I, we will work together going forward from there,” Del Vecchio said.

The companies will look for cost savings by combining some resources, but there is room for growth. Cropp said the two organizations see “some significant growth opportunities,” particularly in the area of pharmacy. Cropp mentioned Independent Health subsidiary Pharmacy Benefit Dimensions, and how that subsidiary could serve not only Independent Health and MVP but also other regional health plans.

Job cuts are possible. MVP has 1,700 employees and Independent Health has around 1,200. Given the “nature of the economy and everything that’s going on around us,” Cropp said the organizations can’t make promises to employees about job stability.

“We see that this is something that has some exciting growth opportunities, but we can’t make any promises at this point, other than that we will keep people informed along the way,” Cropp said.

Independent Health has been looking for a partner for a long time. Independent Health announced a strategic alliance with Albany health plan CDPHP as far back as May 2014 as it sought to share practices and trim expenses.

Its talks with MVP started April 14 of this year, recalled Del Vecchio.

Del Vecchio was driving to Boston when Cropp called him to have a “conversation about what we could do together.” The two executives have known each other for many years and, since that phone call in April, have been working to bring the affiliation to fruition. That included several meetings a week for the last few months.

Cropp confirmed Independent Health had previously been looking for a partner. And in a lot of those prior conversations with other potential partners, Cropp said “there was always this arm wrestling in terms of the other party thought they were better, and we had to figure out how to bend to their way.”

“The conversations with MVP from the beginning have been about the complementarity of the capabilities, the geography and the alignment of the culture and the values,” Cropp said. “Together, we can do far more building upon the complementarity of those capabilities.”

This seemed to be the right time for Independent Health to affiliate. Many health care experts in Western New York expected an announcement like this before long, given Independent Health’s financial struggles in recent years.

In 2023, Independent Health recorded a net loss of about $193 million on revenues of $2.3 billion. Last year, the net loss was $66 million on revenues of $2.5 billion.

Independent Health cutting 59 jobs as health costs rise

The cuts come after Independent Health reported that it had a net loss last year of $66 million on revenues of $2.5 billion.

As a small, local health plan, Independent Health had long been “an anomaly” in a health insurance business where companies need scale, explained Larry Zielinski, a health care administration expert and a former Buffalo General Medical Center president. A smaller health plan with fewer members comes with more risk, he explained, while it’s better financially to be able to spread that risk over a larger pool of members.

“It was a matter of survival for Independent Health,” said Zielinski, who called operating small health plans “a thing of the past.”

Combined, MVP and Independent Health will serve almost 1 million members with annual revenue of $7 billion.

And while Independent Health has had financial struggles, MVP is coming off a strong year in 2024 when it recorded a $508 million surplus on total revenue of $3.9 billion.

It will take time to know whether this affiliation is good for Western New York. Zielinski noted that it could be good news because it puts Independent Health on firmer financial footing.

What’s harder to discern, he said, is how the affiliation will evolve. Zielinski noted it can sometimes be hard to keep a “local focus and local service flavor” while executing an affiliation with a larger partner.

What Del Vecchio and Cropp see, however, is the affiliation of two like-minded nonprofit health plans that are rooted in their respective communities.

“I’m deeply committed to maintaining the direction that we’ve had and the way we’ve lived our values here in Western New York through this, and I think that the structure that Chris and I have agreed upon is going to be fully supportive of that,” Cropp said. “So I’m very excited that all of the energy that we put into being an important part of this community will continue to go forward.”

Members won’t see any changes for now. While the affiliation is going through the approval process, the companies said their members “can expect business as usual with no immediate changes to coverage, benefits or local personalized service.”

Once the deal is approved, it’s hard at this juncture to forecast what changes could occur. When HealthNow affiliated with Pittsburgh-based Highmark in 2021, Zielinski said there weren’t many changes in the first year, though more “Pittsburgh flavor” came to Western New York in the years that followed.

With larger scale, Cropp said that could help Independent Health keep administrative costs down and, in turn, keep premiums lower for members. For example, Cropp said there’s an economic advantage to providing information security to protect the data of 1 million members instead of 350,000 members.

“For us, scale is our ability to impact the administrative costs and our ability to remain relevant so we can have meaningful, productive conversations with our willing provider partners to bring about innovative solutions that are going to enhance access, improve quality and affordability,” Cropp said.

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