This graph from the National Association of Insurance Commissioners shows Crestpoint suffered multimillion annual underwriting (yellow line) and net revenue (purple line) losses.
By Jeff Keeling
Despite tripling its premium revenues from fiscal 2014 to fiscal 2015, Mountain States Health Alliance’s foray into offering its own Medicare advantage insurance plan, CrestPoint Health, was far from profitable, MSHA Senior Vice President Tony Keck said Friday.
Tony Keck
“We were losing money, which is not unusual for a startup plan in insurance in any business,” Keck said. “That’s why, for instance, the federal government was giving the co-ops $100 million to start up an insurance plan – but you can see where a lot of those co-ops have ended up going bankrupt.”
MSHA announced last week it would cease offering CrestPoint, a decision that will affect more than 6,000 Medicare advantage customers. Those customers, who have received letters from MSHA, have until June 1 to find another Medicare advantage plan.
CrestPoint also serves as the third party administrator for more than 13,000 MSHA employees and dependents (MSHA is self-insured). Those services will transition to Blue Cross Blue Shield effective July 1. Around 50 people work at jobs related to CrestPoint, though all but about 10 of those have other duties involving different MSHA service lines, Keck said.
MSHA unveiled CrestPoint about four years ago, at a time when the health system’s previous administration was not alone in believing there may be advantages to entering the insurance market. But filings with the state show CrestPoint lost around $8 million in each of the years 2013 and 2015, and about $4.8 million in 2014.
The losses came despite premium revenues rising from about $1 million in the fiscal year ending June 30, 2013, to $10 million the next fiscal year and more than $30 million in the most recent fiscal year. Keck said assessments prior to the implementation of the Affordable Care Act (ACA) that “MA” product lines, as he called them, could become profitable for hospital systems, “relied on a whole set of assumptions that I think eventually didn’t play out.”
The ACA has changed the landscape for insurance companies, so much so, Keck said, that in conversations with a similarly sized health system that recently vetted starting its own MA plan, “their due diligence indicated that to make it a reasonable business they were going to need half a million (covered) lives and it would take two to three years to generate a profit.”
The disruption to current customers and impact on CrestPoint employees were weighed in the balance against not just the bottom line numbers, Keck said, but with an eye toward MSHA’s overall mission.
“We have other lines of business that lose money, such as a number of our rural hospitals,” said Keck, whose duties include overseeing Integrated Solutions Health Network, the division under which CrestPoint operates. “So the decision criteria isn’t purely, ‘are we losing money on this service line,” it’s ‘what role do we have in the market?’ It’s pretty clear that nobody else in the market is going to be able to run rural hospitals like us, for example, but there’s a number of very good organizations that run MA plans.”
Merger Related?
Asked whether MSHA’s leadership considered, in light of its pending request for approval to merge with Wellmont Health System, the insurance industry’s likely preference that hospital systems not compete in the insurance segment, Keck said he couldn’t speculate – at least not on how Virginia and Tennessee would view the issue. He said the analysis of CrestPoint and decision to end it came independent of the merger considerations.
“There’s a couple of insurance companies that have voiced concern (during merger-related hearings) – Anthem being one of them – that the merging entities also had an insurance product,” Keck said. “But the reason we vetted this when I came on board was related to, ‘can this be a viable business for Mountain States?’”
In a letter to MSHA employees dated April 13, CEO Alan Levine wrote of his belief that “the stakeholders in our region” care most about MSHA providing well capitalized hospitals; investing in physician recruitment and retention; investing in technology that improves care; and “ensuring access to services where we alone add value.
“Where other well-capitalized companies are already in the insurance market, it is therefore difficult to justify the ongoing major investment required to continue in that space, particularly given that CrestPoint was offering something that was already readily available in the market,” the letter continued.
Keck said the wind-down will last several months, and that CrestPoint employees whose jobs are being eliminated will have the option of an additional three months of full salary and benefits if they choose to participate in MSHA’s “career resource center.” That center helps people seek other options within MSHA if their jobs are being eliminated.
Levine’s April 13 letter also referenced a desire to build “greater alignment with physicians” as reimbursement models move toward paying for value and not just volume. Some independent physicians’ groups also have expressed concern about potential effects of a MSHA-Wellmont merger.
“Alan has spent a lot of time reaching out to folks, emphasizing two things,” Keck said. “One, we need each other; and two, you’re great at what you do and we’re great at what we do, so let’s work together. Our interest is not in owning everything and running everything.”
