Sendero’s strategic shift shows early promise, officials say

Jan. 18--A plan to keep afloat Sendero Health Plans, the Travis County health district's nonprofit insurer, will likely yield about $1 million in net income this year, essentially a break-even scenario for the insurer, according to a preliminary analysis.

That modest financial outcome, though, would be welcomed by Sendero executives and Central Health leaders in the wake of repeated annual losses for the insurer.

"We're excited," Sendero President and CEO Wesley Durkalski said. "This is perfect. This is exactly what we were hoping for."

The final numbers will be a key harbinger of Sendero's future, as Central Health counts on new sign-ups to reverse the nonprofit's negative financial outlook. The insurer has been operating at a loss every year since 2012 with the exception of 2016, according to Texas Department of Insurance data showing net income after taxes. Data for 2018 is not yet available.

In September, Central Health's board cautiously decided to reverse an earlier decision to do away with Sendero after the idea sparked an uproar from policyholders and their supporters. The agency voted unanimously to give the provider $26 million in fiscal 2019 but set several conditions, including that the future strategy must show signs of success before a checkup in June when board members will re-evaluate future funding.

As part of the plan launched this fall to save Sendero, the health district set a goal of enrolling enough high-need patients into the insurance plan to trigger increased payments received through the Affordable Care Act's risk adjustment program. The program attempts to create an even playing field by requiring insurers with healthier members to make payments to insurers covering sicker members. Sendero, which had a higher ratio of healthy to sick patients, was paying into the system, rather than receiving payments from it, which Durkalski said sapped its finances.

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Central Health leaders decided to target a group of high-need enrollees in two existing programs for low-income families that provide coverage of some health care costs, but not insurance, and offer to pay their premiums if they signed up for Sendero.

It will be a couple weeks before officials know exactly how many people signed up during open enrollment for the Affordable Care Act program this year because existing members are auto-enrolled and have until the end of January to make their first premium payments. But preliminary data show that 205 people from other subsidy programs decided to move to Sendero this year.

An actuarial report created for Central Health this fall estimated that if Sendero could shift 500 members from subsidy programs, it could receive between $11 million to $24 million in net income in 2019, depending on those new members' average risk score, a measure based on an enrollee's predicted health care costs.

Though Sendero brought in fewer subsidy program enrollees than that estimate outlined, Central Health CEO Mike Geeslin said the agency is still on track because the new members' average risk score was higher than projected in many of the sample scenarios.

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"Our initial indication is that they (the risk scores) are high enough," Geeslin said in regard to what the enrollees might mean for Sendero's financial health.

Sendero's preliminary analysis projected that in 2019 it would make about $90 million, pay $3 million to the risk adjustment program and spend about $66 million in medical expenses and about $19 million in administrative expenses. That would result in a net income of about $1 million in 2019, compared with an estimated loss of $19 million in 2018.

Overall membership also was projected to be higher in the report, which assumed Sendero would attract 15,000 members in 2019 beyond the new ones brought over from the subsidy programs. About 14,250 total members were signed up as of Thursday, Durkalski said. He estimated the annual average will be closer to about 15,000 members.

That would be in keeping with national and statewide trends of lower enrollment in the ACA marketplace. In Texas, sign-ups dropped by about 3.6 percent, from 1.13 million people in 2018 to about 1.09 million in 2019.

Experts attributed the slight decline to the lack of a financial penalty in 2019 for people who opt to go without health insurance; less support and outreach regarding the ACA from the Trump administration; increased availability of short-term health plans that don't have to comply with the ACA's coverage requirements; and lower unemployment that might have contributed to more people having employer-provided health insurance.

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