Sale to let New Mexico Health Connections veer from group, commercial plans

Sept. 28--New Mexico's first and only health insurance cooperative is selling part of its business to a publicly traded, Virginia-based company as a way to raise cash and continue operating.

New Mexico Health Connections announced Wednesday it will sell its 22,000-customer group and commercial health insurance business to Evolent Health, forming a subsidiary called True Health New Mexico Inc.

Evolent, based in Arlington, Va., specializes in health data and technology. It went public in 2015 and recently raised some $66 million from investors, with an aim to expand and make acquisitions. Evolent, which is publicly traded under the symbol EVH, has agreed to pay $10.25 million in cash for the insurance assets and management. The agreement was announced before the start of trading Wednesday.

The employees now at Health Connections, including the chief executive, Dr. Martin Hickey, will operate True Health New Mexico for Evolent, according to the agreement.

Perhaps more important for the state is that Evolent will pay Health Connections another $10 million so it can sustain the individual insurance plans of some 18,000 consumers, most of whom purchased their coverage through the federal Affordable Care Act internet portal known as healthcare.gov.

Assuming the deal is approved by regulators, that cash would stay with the nonprofit for solvency so Health Connections can continue offering individual health insurance in all 33 counties in New Mexico.

"To interpret this as the demise of the co-op, that's just backwards," said Hickey, a nationally known expert on the Affordable Care Act. "This is a co-op that is very strong and has a strong future in front of it."

But the road has not been easy. Insurance regulators in New Mexico have been concerned about whether Health Connections has enough reserve cash to pay premiums in 2018. State Insurance Superintendent John Franchini said the best option would be for Health Connections to find a stable financial partner.

Health Connections was established as a nonprofit with a grant from the Affordable Care Act to bring greater competition to the insurance market in a state with many low-income counties, where private insurance is not affordable. In fact, before the new federal law, just two providers offered plans.

Health Connections has posted two years of financial losses -- $18 million in 2016 and $23 million in 2015 -- and has had to dip into its reserves and a bank loan to cover its costs.

A big part of the problem has been a provision of the Affordable Care Act that requires some insurers to pay compensation to other companies that may have sicker, riskier patients. Hickey says the provision penalizes smaller insurers that have strong case management, which has helped reduce costs with better preventive care and patient oversight, as well as with fewer hospitalizations.

Health Connections and 50 other insurers are contesting the payments in U.S. District Court.

Hickey said the partnership with Evolent makes sense for both organizations and came after months of negotiation. Health Connections already uses software and patient management systems managed by Evolent, and Hickey serves on a national health care reform committee with Evolent executives.

Hickey said the agreement will not affect premiums now charged to small groups and businesses. Consumers on Nov. 1 can begin purchasing individual plans for 2018 on the healthcare.gov exchange.

Though Health Connections still has the lowest monthly premiums of the four providers on healthcare.gov, the monthly cost for a typical consumer is scheduled to increase about 30 percent, and that will present challenges for all insurers in the coming year.

In 2015, Evolent Health was named one of the 100 most promising companies by Forbes. Evolent's stock was trading at $17.50 on Wednesday, up 5 percent. But it is down 30 percent for the past three months on investor concerns that is is borrowing too much and expanding too quickly.

Both firms expect final approvals for the partnership before the end of the year.

Contact Bruce Krasnow at brucek@sfnewmexican.com.

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