The Maryland Insurance Administration barred Evergreen Health from selling health insurance policies for individuals until federal and state regulators decide whether to allow the cooperative to convert to a for-profit insurer and receive a much-needed cash infusion.
Roughly 6,000 people who bought an Evergreen plan through the state's health insurance exchange last year now have only weeks to choose a new plan or automatically be assigned to another insurer's policy in order to have coverage starting Jan. 1. Another 3,000 people who bought individual plans directly from Evergreen will be on their own to pick a new insurer.
The decision is the latest development in Evergreen's effort to stay afloat amid mounting financial pressures that have forced all but a handful of the 23 health insurance co-ops founded under the federal Affordable Care Act to close. It also comes as health regulators and patient advocates wonder what will become of a health law that President-elect Donald J. Trump has vowed to ax.
"If you look at the Affordable Care Act and why they created co-ops to begin with — a focus on medical outcomes, disease management — Evergreen is the poster child of what Congress tried to accomplish," said Maryland Insurance Commissioner Al Redmer Jr.
Evergreen announced plans in October to be acquired by an unnamed group of investors and convert to a for-profit insurer. The deal hinges in part on approval from the federal Centers for Medicare and Medicaid Services, which regulates the co-ops, or consumer oriented and operated plans, and gave Evergreen a $65 million startup loan.
Evergreen has been unable to sell individual plans through the exchange since Maryland's open enrollment season launched Nov. 1 as regulators considered the insurer's proposal. The insurance administration allowed the insurer's plans to be listed on the exchange website, but people could not purchase them. Shoppers could buy individual plans directly from Evergreen, but those who did were not eligible for the income-based subsidies available through the exchange.
Insurance regulators had hoped that Evergreen would work through the regulatory process in time for the beginning of 2017 coverage. But exchange shoppers must sign up by Dec. 15 if they want their coverage to take effect Jan. 1, and with that deadline rapidly approaching, Redmer said he had to pull the plug on Evergreen's individual market business.
"The balance we tried to achieve was to give them as much time as possible to complete their work with the federal government and get them on the exchange," Redmer said. "By waiting until the absolute last minute — probably past the last minute — we now have the challenge of getting these folks re-enrolled in just a couple weeks."
About 6,000 people who bought Evergreen plans for 2016 would, under normal circumstances, have been automatically enrolled in the 2017 version of their old plan. Instead, the exchange will automatically enroll those members in another insurer's plan that is most similar to theirs — in most cases a plan by either Kaiser Permanente of the Mid-Atlantic States or CareFirst BlueCross Blue Shield.
People can log on to the exchange website or work with a broker to choose their own policy, and have until Dec. 31 to make the change for Jan. 1 coverage.
Some people who bought an Evergreen plan through the exchange already may have chosen a different plan, while others may have been waiting to see whether Evergreen's plans would become available.
Karen Harbaugh waited.
Since opening her Frederick bakery, Cluster Spire Pastry Shop, in 2001, Harbaugh has often had to go without insurance, unable to afford the cost. Last year, she signed up for an Evergreen insurance plan, the cost of which was offset by a subsidy through the exchange.
Harbaugh liked what Evergreen stood for, and it was nice to have coverage, albeit expensive coverage, for a change, she said.
"I'll be calling the broker tomorrow, I guess," Harbaugh said.
Evergreen will reach out to another 3,000 more people who bought individual plans for 2016 directly from the insurer. They also must pick a new plan because Maryland law prohibits insurers from selling individual health plans at all if they do not participate in the exchange.
Evergreen is one of only a handful of the co-ops remaining in business. Most closed or are in the process of winding down, unable to withstand the high costs of starting up an insurance company and overcome the regulatory hurdles.
Evergreen also was hamstrung by a new insurance rule that required it to make a $24 million "risk-adjustment payment" — more than a quarter of its $85 million revenue in 2015 — to insurers on the exchange with sicker members.
"Obviously it's been a tough road for the co-ops and Evergreen is one of the last ones standing," said Jonathan Weiner, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.
Exclusion from the individual market will cost Evergreen close to 10,000 members — about a quarter of its membership.
But CEO Dr. Peter Beilenson said he is not worried.
In the coming days, Beilenson said, the insurer expects to finalize an agreement with the Centers for Medicare and Medicaid that would require Evergreen to pay off a portion of its $65 million startup loan in exchange for no longer being overseen by the federal agency. Evergreen then would need to work through a lengthy state process of paperwork and public hearings to convert to a for-profit insurer, which could take up to five months. Beilenson said he hopes to finalize the conversion in April or May.
"When the conversion is done we'll be in a much stronger financial position than we have been before," Beilenson said.
In the meantime, Evergreen is still able to sell plans to businesses, where the insurer already had shifted its focus. Beilenson said he expects to more than make up for its loss of individual members in new business clients. Evergreen has about 29,000 members through small and large business groups, and expects that number to grow to 40,000.
The Evening Sun
Evergreen's exit from the exchange leaves just three options for shoppers and has patient advocates worried that consumers' choices are too limited. In addition to Kaiser and CareFirst, Cigna also sells individual health plans.
"We need a competitive market in Maryland. We need Evergreen," said Leni Preston, president of the state advocacy group Consumer Health First
Weiner, of the Bloomberg School, said that may be a lesser concern in light of the volatility that is likely ahead for the individual market, as Republicans pursue options for replacing the Affordable Care Act.
While a majority of Americans get health insurance through their employers, some of the health law's biggest changes and most drastic price fluctuations hit the individual market, where people who previously had been denied coverage were now able to shop for health plans.
"This is just the beginning of the hassle factor," Weiner said. "I don't think it's going to be as dire as some people think. But it's not going to be an easy few years."