In a statement last Monday, Dr. Peter Beilenson—CEO of Baltimore-based health insurance co-op Evergreen Health—announced that the nonprofit will be acquired by a consortium of private investors and subsequently converted into a for-profit insurance company.
Evergreen declined to divulge the identity of the investors involved with the deal. Terms of the deal were also not disclosed.
The co-op was one of the 23 nonprofits formed under the Affordable Care Act (ACA). With Evergreen’s privatization, only five of the co-ops will remain.
The deal would allow Evergreen to remain in business, but would reflect negatively on one of the original goals of the ACA: to establish consumer-oriented and -operated health plans to improve competition in the insurance marketplace and help curb rising prices.
"It really was envisioned that the plans would be nonprofits that would plow any profits back into the benefits, so that ultimately the beneficiary of their success would be the consumer," said Sabrina Corlette, a senior research professor at the Center on Health Insurance Reforms, Georgetown University, Health Policy Institute.
"By converting to a for-profit, while it may be essential to Evergreen's survival, now the reapers of any success will be investors, not the members — that's unfortunate," Corlette added.
The acquisition awaits approval from the Maryland Insurance Administration, as well as the federal Centers for Medicare and Medicaid Services, which loaned Evergreen $65 million of seed money and initially banned for-profit conversions by the co-ops. If approved, the deal could close in the first quarter of 2017.
Evergreen and its investors will negotiate reimbursing a portion or the entire $65 million startup loan the co-op had received from the Centers for Medicare and Medicaid Services as part of the review of the deal.
While Evergreen originally turned in a profit during its early days, the risk-adjustment program forced the co-op to make a payment that amounted to $24 million in 2015—over a quarter of its $85 million in revenue—to offset the risk of insurers with the sickest members. Evergreen sued the federal government in June over the risk adjustment rule, arguing that it put smaller firms at a disadvantage.
Fifteenth Obamacare co-op to shut down after losing $90M in 2015
Insurers in Maryland propose health insurance rate increases for next year