Evergreen Health CEO: CO-OP will become for-profit ‘to survive’

Maryland’s consumer operated and oriented plan, Evergreen Health, has decided to become a for-profit entity after its board agreed Monday to allow private equity investors to take over the CO-OP from the federal government to keep it from shutting down.

The Maryland CO-OP is taking on a loan to finance the next several months of operations, ensuring that Evergreen’s 38,000 members can keep their current insurance card and maintain their current coverage, the Washington Post reports. The identity of the investors and the amount of the loan will be disclosed next month at a state regulatory hearing.

If regulators allow Evergreen's move, just five of the original 23 CO-OPs would be left standing, the article notes.

The CO-OP would have made a profit of $2 million to $3 million this year if it weren’t for the Affordable Care Act’s risk adjustment program, which required Evergreen to make some $23 million in payments to the federal government, Evergreen CEO Peter Beilenson, M.D., told the Post. “We had to look at a way to survive,” he said.

In June, Evergreen filed a lawsuit against the federal government over such payments, arguing the current risk adjustment formula disproportionately harms smaller health plans. The risk adjustment assessment required the start-up CO-OP to relinquish approximately 26 percent of its 2015 revenues of $84 million, FierceHealthPayer has reported.

The Centers for Medicare & Medicaid Services has tweaked the risk adjustment program for the next two years, but not in time to save Evergreen.

Evergreen has been one of the more innovative CO-OPs, with Beilenson previously telling FierceHealthPayer that it shares claims data with primary care centers to identify patients who could benefit most from interventions.

Beilinson also said that Evergreen promised CMS and the White House’s Office of Management and Budget that the CO-OP would return a yet-undetermined percentage of a $65 million start-up loan it received from ACA provisions, according to the Post.

For failed CO-OPs, CMS has said it would pursue legal recourse to recoup some portion of their start-up solvency loans, but the National Association of Insurance Commissioners has argued the federal government is a lower priority than other creditors when it comes to liquidating CO-OP assets.