Two of the handful of nonprofit Consumer Operated and Oriented Plans (CO-OPs) created under the Affordable Care Act (ACA) that remain in business recently entered state-controlled receivership. Both HMOs — Maryland’s Evergreen Health, Inc. and New England’s Minuteman Health, Inc. — have been trying to convert to for-profit status.
On Aug. 3, the Massachusetts Division of Insurance said it had seized control of 37,000-member Minuteman because of a “very thin” level of capitalization. In December 2016, Minuteman got its final federal loan distribution of about $154 million, state regulators said, and its “risk adjustment obligations announced in June of 2017 were much higher than what was estimated,” bringing the plan’s surplus to “a level which merited this action.” The Supreme Judicial Court for Suffolk County approved the receivership on Aug. 2.
State regulators said Minuteman is expected to be able to pay its claims this year, and plan members in Massachusetts and New Hampshire won’t be affected. Minuteman’s individual policies will remain in effect through Dec. 31, and group coverage will be allowed to continue until the next renewal date, state officials said.
“Certain officers and directors of MHI are seeking to organize a new Massachusetts health insurer (also to be licensed in New Hampshire) by Aug. 16, 2017. If they are successful, that will afford an additional insurance option for consumers in both states,” Massachusetts insurance regulators said in a statement Aug. 3.
In Maryland, 25,000-member Evergreen says on its website that it was ordered into rehabilitation by Baltimore City Court on July 31 and is no longer issuing new or renewal policies.
Evergreen began working with state and federal officials and seeking investors last year amid mounting financial strain. On June 14, the Maryland Insurance Administration approved Evergreen’s acquisition and conversion to for-profit status. The state’s go-ahead was needed before Evergreen could finalize a deal with two regional health systems and a private investment group.
At that time, Peter Beilenson, M.D., Evergreen’s founder, had told AIS Health that the deal was expected to close no later than July 15. But state insurance regulators say they were informed July 24 that private investors were pulling out of the deal. On July 27, Maryland Insurance Commissioner Al Redmer, Jr., issued an administrative order “prohibiting Evergreen Health from making any disbursement, payment or transfer of assets” without the commissioner’s prior approval — and barring Evergreen from selling or renewing any policies. Evergreen’s board agreed to let the state petition the court, which signed a rehabilitation order by consent on July 31 that put the HMO into receivership.
“The Maryland Insurance Administration took all possible steps to keep Evergreen in the market. Unfortunately, the company’s financially hazardous condition and the failure of the acquisition to close necessitated regulatory action on our part,” Redmer said in a statement. “Issuing this order is a difficult decision that had to be made in order to protect Evergreen consumers.”
Spokesperson Tracy Imm of the Maryland Insurance Administration tells AIS Health that the investors trying to finalize their acquisition of Evergreen got cold feet after they “got new information…that led them to think it wasn’t a good investment” — referring to the latest round of data on what plans will get paid — or owe — on federal risk payments.
According to the data released by CMS June 30, Evergreen’s reinsurance payment amount for 2016 is $2.5 million. And while Evergreen will get a federal risk adjustment payment for the individual market of $1.2 million for the year, it must pay $10.6 million back into the ACA’s risk adjustment program for the small group market.
Maryland state insurance regulators said they had met monthly with Evergreen over the past year. Evergreen recently filed preliminary premium rates to participate in 2018 in the state’s exchange for individual and small-group coverage, but under the administrative order the plan won’t be listed as an option for the open-enrollment period starting Nov. 1, regulators said.
“This has taken up a lot of our time,” Imm says of the Evergreen situation, describing Redmer, Maryland’s insurance commissioner, as being committed to trying to find a way to offer consumers a range of 2018 health insurance options. “We’ve really exhausted everything we can think of to keep them in the market,” she says.
Beilenson resigned as Evergreen’s president and CEO on Aug. 1, the day after the judge appointed a receiver to manage Evergreen’s daily operations and finances. Currently, the receiver is looking at Evergreen’s books and deciding what next steps to take, Imm said Aug. 10. “In the meantime, other potential investors can come forward.”
Beilenson could not be reached for comment by HPW’s press deadline.
Adapted from the 8/14/17 issue of AIS’s Health Plan Week.
Published by AIS Health
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