HEALTH CARE INDUSTRY : PacifiCare to Franchise Elderly Coverage in Northeast

PacifiCare Health Systems, borrowing a rapid-expansion technique from other industries, said Monday that it will franchise its health maintenance organization program for the elderly.

The agreement to offer PacifiCare’s Secure Horizons, a Medicare alternative program, through Tufts Associated Health Plans of Waltham, Mass., is the first of its kind in the industry. It could also be the first of several pacts that would allow the Cypress-based PacifiCare HMO to expand into a potentially huge market with less expense and fewer regulatory restrictions.

So-called Medicare risk programs such as Secure Horizons operate under federal approval. They offer Medicare recipients an alternative to fee-for-service hospitalization and physician coverage.

Only 2 million of the 35 million Americans who are 65 or older are enrolled in HMOs, said Eleanor H. Kerns, an analyst with the brokerage Alex. Brown & Sons in Baltimore.

PacifiCare says its Secure Horizons subsidiary is the nation’s largest HMO for seniors, but its 360,000 members are concentrated in just five states: California, Oregon, Washington, Oklahoma and Texas.

Federal regulations make it costly and time-consuming for an HMO operator to start from scratch in new territory.

“We are not going into Massachusetts ourselves,” said Craig Schub, head of Secure Horizons USA, “because the rules say you have to have a commercial HMO in the same area you have a Medicare HMO.” By marketing itself through Tufts, Secure Horizon can use Tufts’ 340,000 commercial HMO clients to justify signing up 340,000 Medicare clients.