For the sake of competition in Maryland's Obamacare marketplace — particularly for those who buy insurance as individuals, not through their employers — Evergreen Health needs to survive. CareFirst BlueCross BlueShield had 80 percent of Maryland's individual insurance market in 2014, according to the Kaiser Family Foundation, up from 74 percent three years before. Evergreen, with nearly 40,000 members and growing fast, is expanding in the state at a time when other carriers are pulling back. Though still relatively small, it provides another option for consumers and puts pressure on the dominant carrier to innovate and contain costs.
But for the sake of creating a more effective and affordable health care system, Evergreen needs not only to survive but to maintain its mission and identity. Evergreen isn't just another health insurer; it was set up as a co-op with a unique model for delivering health care in a way that heavily emphasized primary care and wellness. It maintains its own primary care offices in which doctors' caseloads are limited, allowing them to address patients' health much more comprehensively than traditional insurance reimbursement models afford. Evergreen has invested in behavioral health specialists to help its members with nutrition, fitness, substance abuse and mental health and coordinators to help them follow treatment plans and manage care with specialists. Its emphasis on evidence-based practices and its commitment to put patients ahead of profits made it just the kind of experiment Obamacare was intended to foster.
As such, we can't help but be concerned at the news that Evergreen has agreed to be acquired by private investors who will convert it from a co-op to for-profit status. Dr. Peter Beilenson, the former Baltimore City and Howard County health commissioner, will still be in charge, and he says the conversion won't alter Evergreen's care model but will improve financial stability and allow investments in new programs and technology. Even so, the introduction of a profit motive raises the concern that Evergreen's priorities could eventually change so that it remains a competitor in Maryland's marketplace but less of an innovator.
The immediate impetus for Evergreen's move is the extraordinary "risk adjustment" payment the co-op has been forced to make under ACA rules designed to compensate insurers who take on higher-risk patients. Carriers whose patients look healthier under algorithms designed by federal regulators are required to compensate those whose patients look sicker, and for 2015, that effectively meant Evergreen had to fork over a quarter of its revenue — $24 million — to CareFirst. Otherwise, Evergreen was in the black. The company is suing over the implementation of that rule, but even if it succeeds, relief will come too late.
The root of the problem, though, is Congress, which has failed to take even the most rudimentary steps during the last six years to make the ACA work. Congress was supposed to provide "risk corridors" payments to help make up for the difficulty in predicting costs under the new health care regulations, but it has not authorized any funds for the purpose, so insurers like Evergreen are only getting a tiny fraction of what they're due. The Centers for Medicare and Medicaid Services may have found a work-around to allow full "risk corridors" payments, but that's too late for Evergreen, too.
Evergreen isn't alone in facing difficulties — almost all of the co-ops established under the ACA have failed altogether — but the stakes for seeing an entity like Evergreen succeed are higher in Maryland than elsewhere. The state is operating under an experimental waiver to traditional Medicare rules that allows Maryland to maintain higher reimbursements for hospital costs provided that it strictly limit the growth of health care spending. By the end of this year, the state is supposed to submit a plan for extending those savings from just hospital costs — which have a long history of strict regulation in Maryland — to all health care expenditures. Making that transition is going to require substantial improvements in primary care, prevention and coordination of care — the very things Evergreen was designed to do.
Dr. Beilenson says the conversion is not a course he would have chosen but that it is necessary to ensure the company's survival. He said Evergreen had a choice of investors and was able to pick those most committed to its mission. Their identities and the terms of the deal are confidential for now but will become public in November when Evergreen submits its application for conversion to the Maryland Insurance Administration, which, like the federal government, will have to approve the transaction. A process for such conversions established after CareFirst's botched attempt to go for-profit in the 2000s requires Maryland Insurance Commissioner Alfred W. Redmer Jr. to find that the deal is in the public good. Mr. Redmer has been strongly supportive of Evergreen as an important experiment in transforming the delivery of health care, and we urge him to evaluate the proposal carefully. It's important that Evergreen provides another choice on the state's health insurance exchange. But it's crucial that it continues its legacy of innovation.