Will shift in strategy improve Sendero’s financial health?

Dec. 10--Three months ago, Travis County's health district was at a crossroads as to whether to continue funding its nonprofit insurance provider Sendero Health Plans.

Central Health created the provider in 2011 with the goal of expanding low-cost coverage to Travis County residents. It has since delivered more than $470 million in health coverage to 135,000 people.

Yet, Sendero has struggled to find its footing financially, posting millions in losses nearly every year. A major obstacle, President and CEO Wesley Durkalski has said, is that Sendero's losing out on federal payments 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. In 2017, Sendero paid about $47 million, or a third of its overall income, to other insurers.

To improve Sendero's financial health, 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 them premium assistance to sign up for Sendero. Theoretically, officials said, it would be a win-win: The members would get more extensive coverage, and Sendero would take in enough federal dollars to largely offset its increased medical costs.

An actuarial report obtained by the Statesman through a Texas Public Information Act request estimated that if the provider could shift 500 members from subsidy programs, it could receive between $11 million to $24 million in 2019 in net income, depending on those members' medical costs. With just 100 such members, however, the provider could be out more than $700,000, according to the report.

BACKGROUND: Central Health approves $26 million for Sendero, but sets conditions

READ THE REPORT: NovaRest actuarial report on Sendero

A little more than a month into open enrollment, about 138 people of more than 400 contacted have moved from Central Health subsidy programs to Sendero, said district spokesman Ivan Dávila this week. The enrollment period ends Dec. 15.

Given the unpredictability of expenses incurred by chronically ill patients and looming changes to the Affordable Care Act by a Republican administration set on eliminating it, health care policy experts say the Sendero rescue plan is a risky proposition. But Durkalski said the benefits outweigh the risks, even if Sendero never hits the 500-person benchmark.

"It's a risk if you just focus on the net income, but it's not risky at all when you look at the difference in resources for care that we're bringing down," Durkalski said. "More is always better, but ... it goes back to the general mission that everyone that signs up is one less person uninsured."

The main subsidy program Central Health is targeting is the Medical Access Program, which offers health care coverage to Travis County residents with family incomes at or below 100 percent of the federal poverty line, which is $25,100 for a family of four in 2018; it goes up to 200 percent for people who are disabled or elderly. The other program, one with a sliding fee scale, serves those who don't qualify for MAP and have incomes up to 200 percent of the federal poverty level.

While those two programs cover basic necessities, the provider network and range of services offered are not as broad as full-fledged insurance, Durkalski said. Central Health's premium assistance program, meanwhile, also covers more out-of-pocket expenses, such as co-pays, deductibles and medicine costs.

Gloria Mims is one of the 138 people who will benefit from that extended coverage next year. The northeast Austin resident said she had to stop working as a home health care aide this February after she suffered a stroke. She's been in and out of the hospital all year with heart failure-related issues and has been living on disability benefits since August.

Mims has been enrolled in MAP for about 20 years, she said, and the program has helped cover most of her medical costs, including heart surgery, toe amputations following a leg infection and treatment for her diabetes, but it has its limitations.

This year, for example, she wanted to see a pain specialist for foot and shoulder pain, but she was told that wasn't covered under MAP. She also knows more medical expenses are in store in 2019, including physical therapy and treatment for an ongoing leg infection. So, when she was contacted by Central Health about moving to Sendero, Mims said she thought it sounded like a good opportunity and signed up.

"That means a lot to me because I've worked all my life ... and it gets hard to adjust to a fixed income," Mims said. "When you ... don't have (the money for) co-pay, that's embarrassing ... I hope it's (Sendero) what they say it is. I can't wait to try it."

Working to adjust its risk

Central Health's board cautiously decided in September to reverse an earlier decision to do away with Sendero after the plan sparked an uproar from policyholders and their supporters. The agency voted unanimously to give the provider $20 million in fiscal year 2019 but set several conditions, including that the strategy must show signs of success before a check-up in June, when board members will re-evaluate future funding. Central Health also added $6 million of funding for the premium assistance program, on top of the $2 million already budgeted.

In initially choosing to wind down Sendero, board members cited its financial difficulties over the years. The provider ended last year $33 million in the red, mostly due to medical cost overruns, state data shows, and it's had to hike its premiums to make up for those losses, as well as losses from the risk adjustment program.

Still, the provider, which this year competes with Blue Cross Blue Shield, Celtic Insurance Co. and Oscar Health in the federal marketplace, offers some of the most inexpensive plans available in Travis County. It served about 24,000 members last year.

Durkalski said Sendero had previously seen its own firm's actuarial reports predicting the results of taking in subsidy program enrollees, but the health district board decided to commission its own such report this fall. Jeff Knodel, Central Health's chief financial officer and a Sendero board member, said it reaffirmed the findings of Sendero's earlier reports.

"We expect the financial results of Sendero to improve by adding these additional high-risk, high-acuity score members," Knodel said.

RELATED: Sendero Health Plans to withdraw from Medicaid, CHIP markets

The report for Central Health, produced in September by NovaRest Actuarial Consulting, runs through a half-dozen scenarios, revising the number of shifting enrollees and their risk scores, a measure based on their predicted health care costs. It assumes as a baseline that the provider will attract 500 members formerly in subsidy programs and 15,000 other members. (Central Health board members asked for a more modest estimate to reflect potential enrollment drop-off because of higher premiums this year.)

If those 500 members had relative risk scores 15 times higher than the overall Texas individual market, Sendero would bring in about $24 million from the risk adjustment program and end up with a net income of about $18 million, the report shows. Lower the risk score of those 500 plan members to 10 times the market and Sendero would net $11 million, it shows. Raise it to 20 times, and Sendero would net $24 million.

Lower the number of members shifted from subsidy programs to 200, and Sendero would net about $4 million. Lower it further to 100 members, and Sendero would be at a loss of $727,870.

"It isn't obvious to me, or most of the market, that this is a winning strategy," said Michael Morrisey, a professor and head of the health policy and management department at the Texas A&M University School of Public Health. "Maybe it is. It strikes me as out there on a limb. ... Most insurers haven't taken this route, so I suspect they, too, think it's a stretch."

Reaching out for enrollees

Central Health, as well as its contractor United Way for Greater Austin, reached out to 258 eligible people by phone and more than 400 by mail as of Nov. 8, according to a memo presented last month to the health district's budget and finance committee. As of this week, they've made 1,496 calls, sent 770 letters and have visited or attempted to visit 62 homes.

Of the 100 people who had signed up as of that date, their average risk score was 26.61. Their average monthly premium would be $1,180 for an estimated overall annual cost of about $1 million to Central Health.

Stephanie Lee McDonald, Central Health chief of staff, told the committee at the Nov. 14 meeting that the agency is trying to contact about 100 MAP members who are homeless and more difficult to reach. They've also expanded outreach to people with chronic conditions, such as dialysis, whose needs aren't being fully met by the MAP program, McDonald said.

COMMENTARY: Why one Sendero board member believes the MAP plan will work

Board member Abigail Aiken said when the board reviewed actuarial report results, the group thought, "'Man, this doesn't look so great. Are we sure we've got a strategy here?'" Considering that, Aiken asked Central Health President and CEO Mike Geeslin how he felt about the results of outreach so far.

"The fact that we're above 100, and you have an average risk score that is well above 15, I think speaks well," Geeslin said. "The other key reference point that was driving those earlier results, the forecast we were looking at, was the total number of Sendero members ... It's not just those that are coming in from this program. It's still early yet to be able to say."

Board member Maram Museitif, who was one of four who initially voted to shut down Sendero, continues to express doubts about the plan.

"The numbers are not adding up," Museitif said. "There's a lot of concerns for me in thinking that we're going to meet the 500 based on where we are right now."

In response, Geeslin pointed to the actuarial report showing that even at 200 enrollees, the plan could still yield profits, adding "the higher risk score, the fewer people you need." One of the conditions of Sendero's continued funding was quarterly reports, Geeslin said, meaning the board will see updated projections by January.

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