Maryland’s individual health exchange will only have two insurers next year after a deal to buy Evergreen Health fell apart this week, leading the state’s insurance regulator to freeze its assets.
Anne Arundel Health System, LifeBridge Health and JARS Health Investors received approval from the Maryland Insurance Administration last month to purchase Evergreen as it converted from an Affordable Care Act co-op into a for-profit insurance company. But the investors said they had “serious concerns” about the insurer’s financial situation and decided to step away from the deal.
“Given this new information, as well as our fiscal responsibilities to our own organizations, we made the difficult decision that we could not move forward with this acquisition,” said Neil Meltzer, president and CEO of LifeBridge Health, in a statement. “We are truly disappointed as we had high hopes that we would be able to offer a stronger and more integrated health insurance option to Marylanders.”
New projections about the risk adjustment payments projected to be owed by Evergreen, in addition to the past payments that caused Evergreen to convert to a for-profit insurer in the first place, were the big problem, said Maryland Insurance Commissioner Al Redmer, Jr. Last year, Evergreen was ordered to pay $22 million in risk adjustment.
“The first nail in the coffin was the payment from last year,” Redmer said. “Nail No. 2, the final nail, was the risk adjustment from this year.”
Redmer on Thursday issued an administrative order “prohibiting Evergreen Health from making any disbursement, payment or transfer of assets without prior approval of the Commissioner.”
The insurance administration said the order was a preliminary step to placing the company in receivership. The order also prohibits Evergreen from entering the individual exchange for the open enrollment period beginning Nov. 1.
“There’s no way to sugarcoat it. Evergreen is not going to be accepting at this point any new business,” Redmer said. “Less competition is bad. More competition is good. There’s no way you can paint this as anything but disappointing at best.”
He said Evergreen policyholders should continue to pay their premiums to ensure coverage. Because Evergreen was out of the individual market while it was in the conversion process, all of its current members are on employer plans. Those plans cannot be renewed, but Evergreen will continue to pay out claims.
The developments were an abrupt about-face from this spring, when the announcement of a team of investors and a shift to become a for-profit insurer left Evergreen poised to return to Maryland’s individual health exchange next year.
“I’m saddened that what was a national model — aligning an insurer with a system of primary care offices — will not continue to be an option for Maryland consumers,” said Dr. Peter Beilenson, Evergreen’s CEO and founder.
“This was an important competitor on the marketplace and another option for people going on and off the exchange, so it will be less competition, which is obviously not good for Maryland consumers,” Beilenson said.
With Evergreen out of the market, only CareFirst and Kaiser will have plans available on the individual health exchange next year.
The investors said they still want to bring a provider-sponsored health plan to Maryland, and Redmer left the door open for Evergreen’s assets to become part of a new insurer in the state. He compared the receivership Evergreen will enter to bankruptcy, allowing a new company or group of investors to come in and build from the remains of Evergreen.
A new insurer in Maryland would have to spend millions of dollars to build a provider network and set up a distribution network, all before it could sign its first contract. But with Evergreen’s assets in place, that groundwork has already been completed.
“That’s an attractive way to grow your business,” Redmer said. “(A new insurer would) immediately have a provider network, a computer system in place, qualified trained employees, a brokered network for distribution and thousands of automatic clients.”
Redmer also said he’s had some preliminary talks with other insurance companies about joining the Maryland market, including Oscar Health, which has helped fill holes in other markets.
“There are a few young startup health insurers with venture capital money that have expanded in different areas,” Redmer said. “This could prove to be an easy access into a market by acquiring an existing company.”