June 13, 2016; Washington Post

The nonprofit health insurance cooperatives established as a part of the Affordable Care Act haven’t had an easy road. More than half—13 of 22—have closed their doors. Some of the remaining co-ops are suing the federal government in an effort to get additional funds and/or relieve themselves of their share of more than $2 billion in federal start-up loans.

Evergreen Health Cooperative, Maryland’s co-op, which serves almost 40,000 residents, is suing for what it claims is the “dangerously flawed” administration of the ACA’s so-called “risk management” provisions, where insurance companies with relatively healthier customers (presumably costing less to cover) take a portion of their revenues to support other insurance providers with relatively sicker customers. The goal of the risk management program was to level the playing field for insurers being forced to insure all individuals, regardless of pre-existing conditions or other actuarial predictions of the insurance companies’ costs of coverage. NPQ reported last year on Evergreen’s optimism after a rocky start and its determination to repay $65 million in federal loans.

Evergreen says that, under risk management, it must pay $22 million, or 26 percent of its revenues from premiums, to the state’s Blue Cross-Blue Shield insurance company. Not only is this requirement a serious burden, Evergreen says, it is based on an inaccurate assessment of Evergreen’s insured population. Since Evergreen is a relatively new insurer, it does not have the vast historical data that an established insurer would have to evaluate its risks. Without such data, the federal risk management program assumes a relatively health insured population when such may not be the case. In addition, it lacks the large market share that would give it the resources to absorb temporary revenue imbalances like risk management payments.

The Centers for Medicare and Medicaid (CMS), which administers the risk management program, has announced that there will be changes to address issues discovered during implementation. Evergreen Health, however, says that it can’t wait until 2017 or 2018 when the changes are expected to take effect.—Michael Wyland