Featured in Health Business Daily, August 1, 2017

Evergreen Health Expects Growth, Returns To Maryland Individual Market as For-Profit (with Table: Evergreen Health Cooperative Profile)

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Subscribe today!

By Judy Packer Tursman, Senior Reporter
June 26, 2017Volume 27Issue 22

In an environment where it is possible to count on one hand the number of nonprofit Consumer Operated and Oriented Plans (CO-OPs) still remaining in the market across the U.S., one plan is staging a comeback of sorts. Evergreen Health, Inc., which originated as a CO-OP created under the Affordable Care Act (ACA), received the Maryland Insurance Administration’s June 14 approval for its acquisition and conversion to for-profit status.

Trying to stay afloat amid mounting financial strain, Evergreen began working with state and federal officials and seeking investors last year. The state’s approval allows Evergreen to finalize a deal with two regional health care systems, LifeBridge Health (through its LBH Evergreen Holdings, LLC) and Anne Arundel Health System, Inc., along with JARS Health Investments, LLC, a private investment group.

Peter Beilenson, M.D., Evergreen’s founder, president and CEO, tells AIS Health the deal is expected to close as soon as the end of June and no later than July 15.

Evergreen covered nearly 30,000 members, generating premium revenue just shy of $86 million, in 2015, according to information posted by Maryland insurance regulators. But in December 2016, Maryland Insurance Commissioner Al Redmer, Jr., determined that Evergreen had fallen into “a financially hazardous condition” and ordered the plan to stop selling individual policies.

Now the state says the situation has righted itself, and Evergreen awaits state regulators’ approval of its proposed premium rates for 2018, anticipating a return to the individual market and continuation of its group business. A public hearing on all insurers’ proposed rates was held June 21.

Health Plan Week

CO-OP Reinvents Itself as For-Profit

“We filed rates and forms and intend to go on the individual market on- and off-exchange — and premiums are the same on- and off-exchange,” Beilenson says. He adds that the platinum metal-tiered exchange plan “wasn’t making much sense,” so Evergreen will offer bronze, gold and multiple silver plans next year on Maryland Health Connection, the state’s exchange.

Evergreen is joined by Aetna Inc., CareFirst BlueCross BlueShield, Kaiser Foundation and UnitedHealthcare in filing preliminary premium rates for a range of individual and group products for coverage effective Jan. 1, 2018, according to state data.

Beilenson, a former public health official, asserts that Evergreen has found a competitive niche with its innovative products, competitive pricing, and care delivered as a local plan offering personalized services. “I give out my cellphone number to every broker we work with,” he says.

He notes that Evergreen, which has no copays for diabetic members’ regular testing and physician visits, is expanding the policy for 2018 to eliminate such copays for members with depression. “Our goal is to keep people healthier…and lower costs,” he says.

Beilenson says he is optimistic about Evergreen’s future business strategy since the plan will have the capital to make needed changes, such as bolstering reserves and putting member services inhouse. “If we had the capital to do it, we would’ve done it ourselves,” he says. “Clearly we’re vastly more stable than we were at this time last year.”

In the end, Evergreen’s conversion to for-profit status won’t change “terribly much, actually,” he says. “Our mission is basically the same: to provide highly personalized, locally run service.”

Not Many CO-OPs Are Left

Evergreen’s rebound strategy comes at a time when only a handful of the 23 member-run CO-OPs formed under the ACA continue to operate.

“There are not that many [CO-OPs] left and with the ones that remain, it’s sort of a mix. Maybe two or three posted good financials into 2017 suggesting they’re getting into the black; others aren’t doing so great,” says Sabrina Corlette, a research professor at Georgetown University Health Policy Institute’s Center on Health Insurance Reforms who has studied CO-OPs.

“A lot of carriers lost a lot of money in the first years of the exchange, even the big boys. They just had the cushion to absorb it that the CO-OPs didn’t have,” she says.

As Corlette describes the situation, she sees “plenty of blame to go around” for the ACA startup plans’ struggles: from CMS to the CO-OPs themselves to a Republican-controlled Congress.

Among numerous factors, she cites CO-OPs having to outsource critical functions, such as claims processing, to meet very short filing deadlines; being prohibited from using federal startup loans for marketing; offering platinum plans that, because of lower put-of-pocket costs, attracted sicker members; and lacking historical claims data to help set initial pricing.

Beilenson blames Evergreen’s financial woes on CMS and its rules that required the plan to pay $24 million last year to insurers with sicker members, describing the CO-OP program as being “very poorly managed” by the federal agency.

That risk adjustment assessment, and ACA implementation setbacks, left Evergreen unable to comply with minimum risk-based capital requirements of its CMS loan and threatened its ability to meet minimum surplus and risk-based capital requirements under Maryland law, he says.

In general, he asserts that CMS pushed rapid enrollment, causing some CO-OPs to underprice the individual market; then the plans got hit by risk adjustment, in which insurers with healthier populations pay funds to insurers with sicker members — and by lower-than-expected risk corridor payments that only compensated 12 cents on the dollar for plan losses.

“We were the tortoise, with slow but steady growth,” Beilenson says of Evergreen. “We were actually profitable for the first few months of last year until risk adjustment came out. We tried very hard to get CMS to change risk adjustment rules, went all the way to the White House and CMS refused to budge.”

In the end, Evergreen filed a federal lawsuit claiming CMS’s risk-adjustment calculations were faulty. “We couldn’t turn a profit, generate enough revenue to meet our expenses [primarily] due to this ridiculous, fatally flawed risk adjustment formula skewed to big insurers,” Beilenson says.

However, Evergreen cancelled the suit, which had been moving forward, so it could be released from the federal CO-OP program in January, Beilenson says. As another step, Evergreen repaid $3.2 million of its $65 million federal startup loan, he says, asserting that Evergreen has been the only CO-OP to pay back any money. “We wanted $33 million in risk corridor [funds] paid back to us, so effectively we gave back $36 million of the $65 million loan,” he says.

Evergreen Aims for 100,000 Members

Evergreen’s current membership is around 25,000, down about 10,000 individual policyholders from last year when the plan was barred from the individual market as it tried to stabilize its business (see table, below).

Beilenson says he expects Evergreen to reach 31,000 to 32,000 members by Dec. 31, climb to 45,000-some members in 2018, including roughly 5,000 individuals and the rest in small and large groups — and then add about 10,000 enrollees annually after that. “My goal is not to get much bigger than 100,000 [members], because you’d lose personalized service, but [the decision] will be up to the new board,” he says.

Evergreen has done better than many other CO-OPs because of a “tremendously supportive insurance commissioner,” Beilenson says. “He’s a moderate Republican. I’m a liberal Democrat. He did more for conversion than anyone else.” Redmer did not respond to a request for comment by HPW’s press time.


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Evergreen Health Cooperative Profile: 2014-2017

Year

Exchange Participation

Total Enrollment

Public Exchange Enrollment

Avg. Exchange Premium*

2014

Individual/SHOP

3,480

1,081

$338.06

2015

Individual/SHOP

11,694

5,000

$270.80

2016

Individual/SHOP

38,000

9,272

$307.83

2017

SHOP

25,839

NA

$381.59

*Represents average of all metal levels and rating areas for a 40-year-old nonsmoker. For 2014, product-level premium data was not available for Maryland.

SOURCE: Enrollment figures are excerpted from AIS’s Directory of Health Plans; public exchange enrollment figures represent the individual marketplace only. Visit https://aishealthdata.com/dhp for information on the online version; email Sales@AISHealth.com to order. Premium data excerpted from PBX, Health Insurance Exchange Database. Visit https://aishealthdata.com/pbx for more information.

Copyright © 2017 Managed Markets Insight & Technology, LLC. All Rights Reserved.

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