State moves to start shutting down Evergreen Health after buyer backs out

The Maryland Insurance Administration plans to ask a judge to appoint a receiver to take over Evergreen Health and gradually close down the health insurer unless another investor or buyer emerges.

Maryland Insurance Commissioner Al Redmer Jr. confirmed the plan Thursday, a day after a group of investors that had planned to acquire Evergreen said they were backing out of the deal.


Evergreen was one of 23 consumer oriented and operated health plans, or co-ops, created nationwide under the Affordable Care Act to offer more options for individuals buying insurance through the online marketplaces the law created. But another provision of the law known as Obamacare proved its undoing.

The state insurance administration issued an order Thursday prohibiting Evergreen from making payments or selling policies, which it described as a preliminary step before seeking a receiver. Redmer said he will ask a court in Baltimore to appoint a receiver in the coming days.

"It's a sad day for the citizens of Maryland anytime in an industry you lose a competitor," Redmer said. "Now we're going to have gradually, throughout the year, employers who are going to lose an option — and that's never a good thing."

Evergreen could not sell insurance on the state's exchange for 2017 as it awaited regulatory approval for its bid to be acquired, but it planned to return for next year.

The unraveling of Evergreen will leave just two insurers — CareFirst BlueCross BlueShield and Kaiser Permanente of the Mid-Atlantic States — for exchange shoppers to choose from.

Evergreen's current members, numbering about 24,000, all of whom are part of employer-sponsored plans, will maintain their coverage, as long as they continue to pay their monthly premiums. But after Aug. 1, Evergreen will not be able to accept new members or renew plans, Redmer said.

Evergreen would cease offering coverage July 31 of next year, when plans held by the last active members, who renewed before Aug. 1, expire. It could take until the end of 2018 or possibly into the following year to finish paying out their claims.

Members will have to find coverage with another insurance carrier.

The receiver will pay claims from Evergreen's liquid assets and premium revenue paid by remaining members. Once all claims are paid, any remaining company assets would be liquidated and its operations ceased.

Founded by former Baltimore City Health Commissioner Dr. Peter Beilenson, Evergreen was one of the few co-ops still operating.

Most have gone out of business or are in the process of winding down, unable to withstand the financial strain of starting an insurance company from scratch and the regulatory hurdles put in place by the same law that created the co-ops.

Even well established insurance companies have struggled to adjust to new Obamacare policies, "so I can't begin to imagine what it's like for a new company," said Sabrina Corlette, a senior research professor at the Center on Health Insurance Reforms at Georgetown University's Health Policy Institute.

"To some extent, it's extraordinary there are any still standing," she said of the co-ops.

One of the biggest financial difficulties many co-ops faced was a risk adjustment program also born of the Affordable Care Act that required insurers with healthier patients to make payments to those with sicklier patients.


Required to pay $24 million — a quarter of its 2015 premium revenue — into that program last year, Evergreen sought an investor to keep it in business.

In January, the federal government released Evergreen from the co-op program, so that it could convert from a nonprofit to a for-profit insurer so it could be acquired. In exchange, Evergreen repaid $3.2 million of its $65 million federal startup loan and forfeited $30 million it was due from another federal program.

In June, the state insurance administration approved Evergreen's acquisition by a group of investors that included LifeBridge Health, Anne Arundel Health System and JARS Health Investments, a group of individual investors.

But on Wednesday, the investors said new financial details prompted them to reconsider and cancel the deal, though they declined to elaborate.

"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."

On Thursday, Beilenson expressed frustration and disappointment that he had been unable to keep Evergreen afloat.

Beilenson said he was inspired to apply for the federal co-op program as a way to improve the way insurers and providers work together. Evergreen's model employed its own doctors who worked at the company's own health centers. The organization had 65 employees as of June.

"We saw this as an open canvas, to try to do something new and to a large extent we were able to do that," Beilenson said. "That was very rewarding, but the last two years have been so difficult trying to maneuver through the morass of obstacles."

Last year, Evergreen sued the federal government over the risk adjustment program that took so much of its premium revenue.

The same program contributed to the investors' decision to walk away, Beilenson and Redmer said. Evergreen estimated it would owe between $4 million and $5 million to the program this year, but recently learned it owes about $9 million, Beilenson said.

"It is ironic — they wouldn't be here today, at least in the form they are, without the Affordable Care Act," said Jonathan P. Weiner, a professor of health policy and management at Johns Hopkins University. "But clearly it was also some of the intricacies of the law that led to their demise."

Redmer said he remains hopeful another investor or insurer looking to enter Maryland's market will want to purchase Evergreens assets.

The insurer's 24,000 members as of June made it the state's smallest health insurer. Those numbers will dwindle as plans expire and are not renewed.

But Evergreen's network of doctors and services could be valuable to an insurer that wants to sell in Maryland and would otherwise need to establish its own contracts with doctors, Redmer said.

Any new deal to acquire Evergreen would need to go through the courts, he said.

At least one of Evergreen's potential investors, JARS Health Investments, thinks the organization still could be a good investment, said Scott Rifkin, the CEO of Mid-Atlantic Health Care, a skilled nursing company, and a member of the JARS group.

"We think there's a valuable organization there and we are continuing to look at options," said Rifkin, who declined to elaborate on what those options are.

Meanwhile, Marylanders will face fewer options for health insurance when open enrollment on the exchange begins this fall even as prices for plans from the remaining insurers continue to rise.


Cigna backed out of the exchange earlier this year, leaving CareFirst and Kaiser to compete for individual members. Both are seeking steep increases to their individual premium rates.

"It's not good for consumers who are left with fewer choices," said Leni Preston, president of the Maryland advocacy group Consumer Health First. "It's just frustrating and irritating and maddening."