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Maryland’s ACA health co-op will switch to for-profit to save itself

Peter Beilenson has been chief executive at the Evergreen Health co-op since it started two years ago in a one-time Baltimore cotton mill. (Ricky Carioti/The Washington Post)
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Evergreen Health, Maryland’s version of the innovative nonprofit insurers created under the Affordable Care Act, decided Monday to become a for-profit company to avoid the possibility of a shutdown, according to its chief executive.

If the switch is approved as expected by federal and state officials, Evergreen’s unprecedented move will leave standing only five of the 23 co-ops, or Consumer Operated and Oriented Plans, which started nearly three years ago.

The other 17 co-ops have either collapsed or been ordered to close by state regulators because of their financial fragility, leaving hundreds of thousands of people to scramble for new coverage. Five plans have folded this year or will wind down in December. A co-op in Minnesota announced late last week that it was getting an infusion of money from investors and will remain open as a nonprofit.

Evergreen, which covers nearly 38,000 Marylanders, has been trying for the past year to forge an arrangement with federal health officials to stabilize its finances. It enlisted help from the state’s congressional delegation and in June filed suit against the federal government.

“This has been a long run,” said Peter Beilenson, its chief executive. In the end, “we had to look at a way to survive.”

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The outcome represents the latest blow to one of the most idealistic aspects of the ACA, which sought to foster consumer-friendly counterweights to big insurers and provide more choices and better coverage. “Healthcare. Only braver,” Evergreen’s website touts. “For far too long, health insurance carriers have put profits ahead of people. We were founded by healthcare leaders who believe there’s a better way forward — for the health of Maryland and for future of healthcare in America.”

Under the deal approved Monday by Evergreen’s governing board, a group of private equity investors, will take it over from the federal government. Evergreen also has arranged for a temporary loan to sustain operations for the next several months until the conversion is completed, Beilenson said. The identity of the investors, as well as the loan amount, will become public next month as part of a state regulatory hearing.

Evergreen wants the switch to be unobtrusive to customers. According to Beilenson, its name will stay the same, and members will keep their insurance cards and current coverage. Those members include about 8,000 people who bought their plans through Maryland’s state-run ACA insurance marketplace. The rest get coverage on their own or through small or large companies.

The decision on conversion reflects a reversal of fortune for one of the few co-ops that managed to become profitable. For each of the first six months this year, Beilenson said, Evergreen was in the black. That ended when it was required to begin making payments under an ACA program known as “risk adjustment.” The program is intended to help buffer the expenses of insurers with many sick and costlier customers by redistributing money from insurers with healthier ones. But it has had a disproportionate, highly negative impact on the co-ops and other small health plans.

Evergreen, for one, got a $23 million bill in June for its 2015 risk-adjustment assessment. If not for that, Beilenson said, the plan would have made a profit of $2 million or $3 million this year.

The Centers for Medicare and Medicaid Services (CMS), which oversees ACA insurance marketplaces, recently announced risk-adjustment changes that will take effect next year and in 2018. They will come too late to potentially rescue Evergreen, however, or the co-ops that have failed.

Financial health shaky at many Obamacare insurance co-ops

As part of recent discussions with officials at CMS and the White House’s Office of Management and Budget, Beilenson said Evergreen promised to repay a still-undetermined portion of the $65 million in federal loans it was provided by the ACA.

Congressional Republicans opposing the health-care law contend that the Obama administration wasted $2.4 billion of taxpayers’ money on loans to the co-ops; ACA defenders counter that GOP lawmakers cut loan funding so severely that the government was unable to provide co-ops enough assistance for them to become stable. CMS officials told lawmakers earlier this year that Justice Department officials were trying to recoup as much money as they could from closed plans.

Beilenson said that for individual insurance policies in Maryland — the kind sold on the state’s marketplace — Evergreen’s will be the least expensive in 2017. The Obama administration “is constantly talking about wanting to have more competition” among insurers, he noted. That’s what Evergreen and the other co-ops have been, “so it is unfortunate they didn’t survive.”

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