Evergreen Health Sues Federal Government Regarding Flawed Risk Adjustment Methodology

BALTIMORE, June 13, 2016 /PRNewswire-USNewswire/ -- Evergreen Health today filed a complaint in the U.S. District Court for the District of Maryland against the Centers for Medicare and Medicaid Services (CMS) in an effort to prevent the collection of payments from Evergreen Health under CMS's dangerously flawed risk adjustment program of the Affordable Care Act (ACA).

"Risk adjustment was designed to stabilize the health insurance markets in the states but, in fact, CMS's implementation of the program has done just the opposite. As designed by CMS, the risk adjustment formula destabilizes the markets and significantly tilts the field against new and growing plans in favor of large, established insurers," said Dr. Peter Beilenson, CEO of Evergreen Health. "If the system isn't changed in the immediate future, many of the country's most innovative and most affordable health insurance companies could very well go out of business, thus reducing competition and increasing costs for American consumers. This, in turn, could threaten the viability of the entire Affordable Care Act." 

Because the ACA requires insurers to take on all enrollees regardless of their health, the idea behind the ACA's risk adjustment program was twofold: to discourage insurers from targeting only healthy people; and to provide financial protection for insurers with significantly sicker members. A complex CMS formula scores the overall health of every insurance company's membership and, every year in every state, insurers that the formula finds to have "healthier" populations pay insurers that the formula finds to have "sicker" populations.

But, contrary to the ACA's original intent, the risk adjustment methodology developed by CMS has simply been a financial boon for the country's largest and most established health insurers, at the expense of new, innovative insurers. Large insurers are spending hundreds of millions of dollars -- money that smaller insurers simply do not have -- to "chase" the health condition codes that are used to compute each insurer's risk adjustment score. In Maryland, for example, the state's largest insurer will receive risk adjustment payments from most, if not all, of the state's other insurers, if the current risk adjustment program is allowed to go forward. Evergreen Health alone will be required to pay approximately $22 million, or 26% of its $84 million in 2015 premium revenue, in risk adjustment. 

"It is outrageous that CMS has clung to its terribly flawed risk adjustment formula, under which a quarter of the money that our members pay us for high quality coverage would be turned over to the largest health insurance bureaucracy in the state. CMS's risk adjustment formula has been criticized by many, including CMS's own former Chief Actuary, as being inaccurate and in need of modification. CMS just last week finally agreed to make some of the changes that have been advocated, but not until 2018. Too much is at stake to wait until then. Changes must be made right now," Dr. Beilenson said.  

Established in 2012, Evergreen Health is a non-profit health co-op that began providing high-quality, affordable health coverage in Maryland in 2014. Prior to this unreasonable risk adjustment liability, Evergreen Health, which now has 40,000 members, recorded five consecutive months of profit; maintained a risk-based capital (RBC) ratio greater than two times the amount required by the state of Maryland; and, most importantly, provided robust, patient-centered care to more than 7000 Evergreen members through its affiliate, Evergreen Health Care, which operates full-service, innovative health centers in Baltimore City, White Marsh, Columbia and Greenbelt. 

To read the full legal complaint, click on the following PDF link.

PDF - http://origin-qps.onstreammedia.com/origin/multivu_archive/ENR/Complaint-Evergreen-6-13-16.pdf

SOURCE Evergreen Health