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Evergreen Health co-op moves to become for-profit company

Peter Beilenson, founder of Evergreen Health Cooperative, says his company is seeing higher enrollment on the state's exchange than last year. (The Daily Record/Maximilian Franz)

Peter Beilenson, founder of Evergreen Health Cooperative. (The Daily Record/Maximilian Franz)

Maryland’s Evergreen Health, one of the few remaining non-profit health insurance co-ops created under the federal Affordable Care Act, is moving to become a for-profit company.

Evergreen’s board of directors approved a bid — one of two submitted — for the co-op’s purchase and conversion to for-profit status Monday, said President and CEO Peter Beilenson.

The plan must still be approved by the U.S. Centers for Medicare & Medicaid Services and the Maryland Insurance Administration. If all goes smoothly, Beilenson said he expects to disclose the buyer and the price in November and that the deal would take effect in the first quarter of 2017.

For Evergreen’s approximately 40,000 members, the transition should be seamless — in fact, services may even improve as the organization’s financial footing improves, Beilenson said.

Buyers are interested in maintaining Evergreen’s business model — the co-op has integrated its own network of primary care offices — and keeping management intact, Beilenson said, adding that he plans to remain in his current position.

The planned sale is a direct result of significant financial constraints imposed on the otherwise-profitable Evergreen by a provision of the Affordable Care Act, Beilenson said.

Known as “risk adjustment,” the provision requires companies with healthier patient pools to pay those with sicker patient pools to spread risk more evenly throughout the market.

That means Evergreen, which initially focused on the small-group market after the malfunction-plagued rollout of the state’s health insurance exchange in 2013, ended up owing $24.3 million to CareFirst, the state’s largest insurer.

Evergreen filed a federal lawsuit challenging the rule, but its request for a preliminary injunction was denied in July.

“This is completely an outgrowth of the flawed risk-adjustment process, without which we would be profitable,” Beilenson said, adding that the co-op would have seen profits between $2 million and $3 million this year.

Ironically, Evergreen could still receive in a few months about $24 million it’s owed through an ACA provision known as the “risk corridor.” Federal regulators initially argued that amount wasn’t payable, but lately seemed to have reversed course, Beilenson said.

Evergreen received a federal loan of $65.5 million to help with its launch, and part of the agreement to sell the co-op will require buyers to pay back a portion of that loan, Beilenson said. The exact amount is still being negotiated, he said.

When that happens, Evergreen will be the first of the 23 co-ops to pay back any of the $2.4 billion in taxpayer dollars they were loaned, he said.

Seventeen of the 23 co-ops across the country have closed, and those that remained saw substantial financial losses in 2015. Evergreen, which lost $10.8 million that year, was the best-performing of the pack, the Associated Press reported in March.

Last month, state insurance regulators granted Evergreen an average premium rate increase of 20.3 percent for individual-market plans and 9.8 percent for small-group market plans in 2017 — higher than the company had requested — a move state Insurance Commissioner Al Redmer Jr. said should help the co-op cover the risk-adjustment payment.

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