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
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.
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