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Md. insurance regulator hears Evergreen’s case to become for-profit

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. (The Daily Record/Maximilian Franz)

Evergreen Health and its investors made their case in a public hearing Wednesday that converting the Affordable Care Act co-op into a for-profit health insurance provider would be in the public interest.

Maryland Insurance Commissioner Al Redmer said he expected a final decision on Evergreen’s conversion application by the end of next week after a final review of the application and the transcript of the hearing.

Redmer, Vinny O’Grady, the associate commissioner for audits and examinations, and Van Dorsey, the Maryland Insurance Administration’s principal counsel, heard testimony from Evergreen Health, evaluators and the investors, Anne Arundel Medical System, LifeBridge Health and JARS Health Investments, a group of investors made up of Maryland health care professionals.

According to law, the application may not be approved unless Redmer determines it is in the public interest.

Dr. Peter Beilenson, Evergreen’s CEO, testified that the conversion would be in the public interest after the co-op had been hit hard by risk-adjustment penalties in the Affordable Care Act. Before those penalties, the insurer had been profitable, he said.

It was then that Evergreen began to explore the possibility of converting to a for-profit insurance company, speaking to more than 75 investors.

“This has been an incredibly stressful year, not knowing whether we would survive,” Beilenson said. But the investors would keep Evergreen’s doors open, he stressed.

The Affordable Care Act penalties that hit Evergreen left the company with zero value.

“Based on our assessment … most of our approaches were indicating that there was zero value or equity,” said Calvin Swartley, of the accounting firm Moss Adams, which conducted the evaluation of Evergreen.

The investors purchased the co-op through a series of loans that have totaled $12 million to date. During their testimony, the investors indicated that they expected to put up to $25 million-$30 million into Evergreen.

Asked why the would put the money into a company with zero value, the investors said they wanted to protect competition in the insurance marketplace, which should reduce premiums and health costs.

“Providing affordable health care is essential to better health,” said Maulik Joshi, the chief operating officer of Anne Arundel Medical System. “We believe that an insurance company will in the future have value.”

Evergreen Health already has around 26,000 members. It operated on the individual exchange, small group and large group markets before the insurance administration ordered the company to cease selling new plans while it was in the conversion process.

JARS investors expect to start seeing a return on investment after 18 to 24 months, said Susan Stitcher, a JARS investor who represented the group at the hearing.

The sale of Evergreen is contingent on the for-profit conversion application’s approval. After a law passed by the Maryland General Assembly last April, Redmer’s approval would take place immediately, with no cooling-off period.

Evergreen has already prepared to re-enter the insurance market. It made rate requests with the insurance administration last month, requesting premium hikes of 27 percent on the individual market.

The company’s return to Maryland’s individual insurance market would add another competitor at a time when insurers have been requesting higher premiums. Last month CareFirst requested a 50 percent increase. Kaiser requested an increase of 18 percent. Cigna, the smallest insurer in the market, requested a 37 percent increase.

Joshi, speaking on behalf of the investors, said leadership changes at Evergreen would not be imminent. But the investors would conduct an evaluation of the company and its leadership to find areas where change could be beneficial.

For the most part, the hearing went as expected, Redmer said, although he added that he was a little surprised no one came forward to testify for or against the application.

The commissioner and the Maryland Insurance Administration had worked with Evergreen throughout the process to make sure everyone knew what the requirements for conversion would be.

“We wanted to make sure it was clear to everyone what the law required, what the standards were and what the expectations were,” Redmer said.


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