‘We’ve been a disrupter and innovator in the marketplace’
Unlike most of the insurance co-operatives launched with Affordable Care Act funding, Maryland’s Evergreen Health Cooperative is not only surviving but turned a small profit on its 40,000 enrolled members during the first quarter of 2016.
Modern Healthcare reporter Bob Herman spoke in June with CEO Dr. Peter Beilenson, who served as Baltimore’s health commissioner from 1992 to 2005, about how public health approaches helped the co-op survive its rocky start. The following is an edited excerpt.
Modern Healthcare: You’ve written about the HBO series “The Wire,” which takes place in Baltimore. How is that relevant to the situation in Baltimore today, especially in light of the Freddie Gray situation?
Dr. Peter Beilenson: “The Wire” very accurately portrays the parts of Baltimore, certainly not all of Baltimore, that are heavily hit by violence, by drug offenses, by drug addiction, all of which are related to a lack of available livable-wage jobs, a lack of affordable quality housing and a lack of public schools that are preparing kids for the 21st century instead of the 1950s. My book, which was called Tapping into “The Wire,” ties a lot of the messages of “The Wire,” which is the institutions that are important in everyday life—schools, housing, police—just aren’t working well for a large chunk of the population.
MH: How is that relevant to what’s been going on with the Freddie Gray case?
Beilenson: What the Freddie Gray case highlights more than anything is that the war on drugs has been a complete failure. It is predominantly a war on poor people and people of color in inner cities.
The drug use is just as high if not higher in private schools in Baltimore compared to the public schools in Baltimore. It’s similar among adults to a large degree. (But) drug dealing is done out in the open in the city, where there are a lot more police officers than in the counties where there’s many fewer police officers, and drug use tends to be inside the house.
The police are not focused on going after the high-level traffickers and the really violent offenders and getting the low-level addicted folks into drug treatment. Freddie Gray— I don’t want to disparage him—but I believe he was involved in addiction and low-level drug trade. This is just an example of the police picking up someone they know that’s involved in the trade and sticking him in the wagon. It happens thousands of times a year.
MH: Has that perspective allowed your cooperative to be more successful than other co-ops?
Beilenson: The reason that we started it is because several of us came from the world of public health and had seen the problems that cause people to be uninsured and not have quality, affordable care. So our mission was to serve those particularly who would come to the exchange and got subsidies who previously would not have been able to afford healthcare.
Unfortunately, the exchange, the Travelocity, if you will, of health insurance in Maryland crashed and burned in the first year, so we got very few people on the individual exchange. We ended up having a fair number of small businesses and now large businesses working with us.
We’re the only co-op in the country that runs our own system of primary-care offices, which have health coaches, social workers and nurse practitioners. Our doctors see half the patients in a given day that normally is done in a doctor’s office because we want to spend a lot more time with our patients. We don’t pay fee-for-service, which is an incentive to do more unnecessary testing. Instead, we pay salaries to our docs and use evidencebased medicine. So, we’re not only providing really good health coverage, but we also provide primary care.
MH: You lost about $11 million on roughly $84 million of net premium revenue last year, but you had a decent medicalloss ratio. How would you characterize Evergreen’s growth right now?
“No one, including CMS, knew how badly skewed this risk-adjustment formula and methodology would end up being.”
Beilenson: We have been profitable every single month of this year, so we are actually in great shape. We’re the most viable of the remaining 10 co-ops left in the country [ Editor’s note: There are now nine], and except for this large risk-adjustment charge, we’d clearly be turning a profit this year. We’re already at a million dollars in profits so far this year, and we will end up at $2 million to $3 million if we win the risk-adjustment case that we’re filing.
MH: How were you able to attract so many smallbusiness owners to your company?
Beilenson: I don’t think we get anybody from the SHOP exchange. We work with small groups, predominantly through brokers. Maryland is a very heavily brokered state, particularly in the smallgroup business. We have developed relationships with them. We provide really good personalized service. We have a great member services team that gives out their phone numbers and regularly will answer with a real human being instead of doing a push button thing where you never hear from anybody.
So, even when there are problems, and we’ve had them, we’re able to handle them very quickly. And they know the person who is actually handling them. That’s been a real selling point. We’re very competitive in our small group rates against CareFirst, which is the Blue Cross and Blue Shield behemoth here in Maryland.
MH: Evergreen sued the federal government recently over what is called the arbitrary and capricious risk-adjustment program. What are the main points of contention?
Beilenson: No one, including CMS, knew how badly skewed this risk-adjustment formula and methodology would end up being. Let me just give you the three or four biggest issues: No. 1, in order to get these “healthier” or “sicker” carriers, you add up all the diagnostic codes that your members have and average it out. Whoever ends up with healthier or sicker patients, they transfer the payment. But in order to get a code, you have to see a doctor, and it has to be entered in your medical record during that calendar year.
So CareFirst has had patients for years. They identify diabetics from the year before and anybody else who has a chronic condition and makes sure they get them to the doctor the following year to get that code again. We had absolutely no way to deal with that because we didn’t have patients before. That’s a huge advantage.
No. 2, we get patients oftentimes well into the year. If you are diabetic and we got you on Nov. 1, even if you are taking insulin, which obviously shows that you’re a diabetic, if you didn’t go to a doctor in those two months, which many people won’t, you appear as a healthy person because pharmacy is not counted.
Third, the grandfather plans had been allowed to exclude people with preexisting conditions. So they had a healthier book of business that they were allowed to keep off the calculation for risk adjustment. That made their population look sicker than it really is.
Fourth, for those of us who do value-based insurance design, in our case we have a great product that gives diabetics all the evidence-based practices, tests, etc., that they need without any out-of-pocket costs. We bring people’s code down. In other words, we improve someone from a complicated diabetic to an uncomplicated diabetic. We’ve made our population healthier because we’ve invested in them. Yet we’re punished by having to pay CareFirst because we took better care of our patients. It makes no sense.
MH: What is a better way to do risk adjustment?
Beilenson: We’re advocating exactly what the CMS came out for in 2018. They are now advocating for exactly what we do, which is to include pharmacy data. That’s an easy way, no matter when you get a patient during the year, to know what their diagnosis is.
They are going to account for partial-year enrollment. They are going to get rid of grandfather plans. They are basically doing everything that we want, partly because of pressure from us and other small new entrants. But they’re doing it by 2018, which is too late.
We’ve asked for it in a year. The lawsuit was a last step for us, the last-ditch step. We’ve been talking to them for a year.
MH: If the changes aren’t made, would Evergreen have to consider closing?
Beilenson: No. It will be a hit, but we can manage it because we’re in such good financial shape. There will definitely be some that will be hurt. There will definitely be some that go under.
MH: Congress has held several hearings on co-ops. Where do you see this program going?
Beilenson: It’s a sad tale in some ways. The co-ops that went down in the first year tended to have underpriced the individual market. They got sicker patients with pentup demand, so they bled out in claims. They had expected risk-adjustment receivables, which they didn’t get for the reasons that I have already mentioned.
Then they thought the risk corridor program would come to the rescue, but risk- corridor was obviously paid out at only 12 cents on the dollar. So they had huge losses, and they went out of business. Now, some large companies also underpriced, the Blues here in Maryland did as well, but obviously they have a variety of books of business and a huge, huge surplus, so they were able to survive being hit with the high cost of the individual marketplace.
The 10 that are remaining, probably half of them won’t make it. But we certainly will, and there are probably four or five that will come out of this. The remaining co-ops want to do what we’re doing, which is running primary-care centers, aligning insurance with care. We’ve been a disrupter and innovator in the marketplace with our diabetic plan, which lowers costs and lowers premiums.
We consider ourselves the agile tortoise. We’re slow but steady, and that’s made a difference for us.
MH: Do you consider the program a success then?
Beilenson: I’ll close with an analogy. What ended up happening was as if a venture capital firm, in this case CMS, invested in 23 startups, in this case the co-ops, and did virtually everything possible in terms of bad advice to literally (create) obstacles, like not allowing you to market yourself with federal money in the first year and putting restrictions on capital—all of which they could have changed themselves.
They basically did everything possible to crush their investments so that they would not get a return on investment, which in this case is repaying taxpayer loans. It’s just insane. And it’s actually somewhat of a surprise that five are going to make it, because it’s been the most poorly managed plan that I’ve seen in my 20 to 25 years in government.