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Evergreen faces challenges in delivering health insurance

Four weeks since it began selling health insurance on the state's new marketplace for the uninsured, Evergreen Health Cooperative Inc. has signed up only five people.

That's a long way from the nonprofit health insurance provider's first-year goal of 15,000 people, so Evergreen is already shifting focus.


Technical problems making it difficult for people to register for the state exchange culminated last week for Evergreen when its plans disappeared from the exchange offerings. The plans were restored after a short time.

Statewide, more than 3,100 people have signed up for health coverage on the exchange, according to the latest numbers released by the Maryland Health Connection. There are about 800,000 uninsured Marylanders.


Evergreen isn't waiting for the exchange to start working properly. For now, the co-op has switched focus from individuals buying its insurance on the exchange to small businesses buying plans directly from Evergreen, said Dr. Peter Beilenson, the former city health commissioner who started it. (The state's small-business exchange has been delayed until Jan. 1.)

"We obviously were predicating most of our business on the exchange market, which is not bearing fruit right now," Beilenson said. "That was a problem for us in two ways: financially in terms of generating enough members and for our mission. We did this for the middle class who would qualify for subsidies."

But the co-op was new and nimble enough to switch "almost overnight to small businesses," he said. "We think it will provide us with enough members to get through until the exchange is running smoothly."

Evergreen's small group rates were approved Oct. 25, so no group has enrolled yet, but the prices are below average and attracting attention from businesses and brokers, Beilenson said. The co-op will depend on enrollment to survive — members' premiums will pay to run the co-op and cover startup costs. Any profits would be returned to the plans.

The co-op's small-group rates are at the lower end of the spectrum, with an average premium of about $368 per insured, according to data from the Maryland Insurance Administration.

The lower rates may reflect Evergreen's model. The co-op employs its own doctors, who work in one of four centers for a salary rather than fee-for-service. The idea is to focus on prevention while managing multiple chronic conditions and staving off costly emergency visits and hospital stays.

Evergreen also offers a traditional plan using a network of doctors.

It's cost that matters most to small businesses, and a competitive premium will serve Evergreen well, said Karen Davis, a professor in the Johns Hopkins University's department of health policy and management. There is a "fair amount of evidence" that shows Evergreen's patient-centered model cuts costs, she said.


But insurance tends to be dominated by large insurance companies, so it remains unclear whether Evergreen and co-ops in other states can slice off enough business.

"The major challenge is size and scale," Davis said. "But the advantage Evergreen has is that its model of care is more effective. … I think they're in a better position than most of the co-ops."

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Nationwide, 24 co-ops received federal funding as part of the Affordable Care Act. Evergreen got $65 million in federal loans, but all but about $13 million will go to a required reserve fund

Others wanted to start co-ops in Maryland, seeing the potential to compete with traditional insurance companies and bring down prices. One was MedChi, the state medical society, which planned to start a co-op largely on the Eastern Shore but was stymied when Congress cut startup funding.

"We're very supportive of the idea of co-ops and think they can work really well," said Gene Ransom, MedChi's CEO. "I don't think they have an easy task ahead. We are rooting for Evergreen because more competition is good for the marketplace."

Beilenson said Evergreen has made other adjustments to survive. It has hired some staff from the insurance industry to serve as a balance with those employees who know more about public health. It has raised $5 million in startup money from private foundations and another $1 million from other private sources for marketing, including a new TV ad (federal law prohibits explicit marketing with government money).


"I think we're well-positioned," Beilenson said. "We think we know what we're doing. And we think we have a really good product."

An earlier version misquoted Dr. Peter Beilenson concerning subsidies for the middle class. The Sun regrets the error.