► Minuteman Health NewsroomNovember 20, 2015

Minuteman Health Files 2015 Third Quarter Financial Report

Boston 11/20/2015 - Minuteman Health (www.minutemanhealth.org) today filed its 2015 third quarter 2015 financial statement, reflecting a net loss of $12.7 million on a premium base of $31.5 million.

The main component contributing to the company's net loss is an assumption of $10.7 million for risk adjustment payable (below is an excerpt from Note 24.E.2 of the publicly available financial report that addresses this issue in detail).

Minuteman has a healthy medical expense to net premium (before consideration of risk adjustment and risk corridor) of 60.2 percent. With those elements, the company is running a medical loss ratio (MLR) of 82.1 percent. Additionally, Minuteman has a stable and strong balance sheet, with $52.4 million in cash and investments on hand as of September 30. That figure increased by $12.5 million in October 2015 and Minuteman expects another $14.2 million in quarter four of 2015. Once that amount is received, the company still will have $52.5 million available via additional surplus note purchase commitments.

“Our careful growth pattern and conservative capital approach has provided us with the stability necessary to retain solid footing during a time when factors outside our control—by far the most important of which is risk adjustment—are posing considerable risk to the industry,” said Minuteman CEO Thomas Policelli.

Policelli said risk adjustment as implemented by CMS has not been meeting the goal of stabilizing the market. “it has actually been a de-stabilizing factor for insurance companies nationally. In brief, companies that grow tend to be net payers on risk adjustment regardless of the underlying health status of their members,” he said.

There are many other factors that can make this result far worse. For example, tightly integrating with a health system to deliver efficient care, having members in a part of a state that is below average cost, and focusing on serving lower-income members all compound the penalty that the current risk adjustment methodology imposes on the plans that grow.

Minuteman has partnered with other health plans to create a coalition to address this concern. The group, called CHOICES, has been working with CMS and state regulators to surface the issues behind the current version of risk adjustment and to propose solutions.

Policelli said: “The mission of Minuteman Health remains to work closely with high-quality, efficient providers to deliver a great product at an affordable price. We have always priced our product using an assumed average population, which in a traditional, successful risk adjustment model would more than cover a balancing payment. The current risk adjustment approach directly harms our mission, and instead encourages us and all plans to strive to have low growth and higher priced products. That is not in the best interest of consumers.”

Excerpt from Note 24.E.2

  • The calculation of risk adjustment is a difficult process and results nationally for carriers have varied widely. There are no industry-wide standards for calculation or even reference points as there are for IBNR, for example. As such, the Company has had to evaluate various methods and assess which may prove to be most reasonable. Note that final results will not be available until Q3 of 2016.

  • The range of the methodologies reviewed varied between 5% and almost 50% of gross premium. The former was driven by assessments made by CMS when designing the program and the effective caps that a plan could pay, and the latter driven by a purely experience-driven assessment of the likely relative health of a population. The method used by the Company for 5 of the 7 quarters has been determined by subtracting the actual Medical Loss Ratio (MLR) from the target MLR. In theory, this should represent a reasonable assessment under a typical risk adjustment program since the Company used an average population (1.0) when calculating premium rates with the outside actuarial firm.

  • The Company has determined that the best estimate, at this time, should be driven by a blend of the historical method (target-actual) and the purely experience-driven approach. For this filing period, that is a 50/50 blend. Going forward, the Company plans to increase the mix in favor of the experience-driven methodology as the data matures. Fully relying on experience-driven data risks being unreliable since that is based on limited data from 2014 results when the Company had <1500 members, immature 2015 experience, unknown maturation of HCC coding information, and no visibility into how significant changes in the overall population (e.g., adding back in the ‘Temporary Medicaid’ population in MA) will alter the risk pool.

  • While the Company views this approach as reasonable and has reviewed it with the Division of Insurance, future volatility is likely. The risk adjustment program and the determination of the payable the Company will face is by far the biggest driver of the financial picture of the Company.

  • Through September 30, 2015, the Company has recorded a risk adjustment liability related to 2015 premiums of $10.7 million, or a 34% haircut to premium. The Company’s risk corridor receivable adjustment for 2015 is $3.2 million, or 10.5% recoupment of premium.


About Minuteman

Minuteman Health is a new member-governed, non-profit health insurance option for Massachusetts’ residents. The company intends to offer individuals and small businesses lower-cost high-quality care with unprecedented transparency, increased efficiency and its unique member-governance structure. Plan members will directly participate by electing the board of directors, becoming board members and providing input for cost management and service delivery. Minuteman will be marketed through their website, brokers and the Massachusetts Health Connector.


Media Contact:
Jim Borghesani


Lisa McTighe
Director of Member Outreach