Health Connections has been bleeding about $20 million in red ink a year, and its capital reserve was dangerously low, even with a $10 million sale effective Jan. 1 of its larger commercial customer base to an out-of-state for-profit company.
The entire Health Connections board departed after June 30 last year, with three new members listed on the company’s Sept. 30 financial statements. Those no longer serving include insurance expert Chris Krahling and cancer doctor Barbara McAneny, president-elect of the American Medical Association.
The company attributed the change to normal election cycles, but wholesale substitution of a corporate governing body raises questions. Where is the institutional memory in the boardroom? And the company’s top executive team, including CEO Martin Hickey, will move to the new for-profit company, True Health, a subsidiary of Virginia-based Evolent Health. So in essence, Health Connections has new governance and new management to tackle its old financial worries.
Insurance Superintendent John Franchini signed off on the sale despite testimony from Presbyterian Healthcare, the University of New Mexico and Blue Cross Blue Shield focusing on Health Connections’ finances and questioning its ability to meet claims its members already have incurred.
Presbyterian and UNM said they were owed a combined $28 million – roughly nine times the amount of Health Connections capital as of Sept. 30, even with the $10 million sale to Evolent – for services provided to people insured by Health Connections. The argument could be made that the company was insolvent as of Sept. 30, though Health Connections would likely dispute the numbers.
Franchini noted only a few of the co-ops were still in operation around the country and said he thought Health Connections made a valuable contribution to competition in the New Mexico market. That’s despite the fact the remaining 18,000-member customer base for the individual coverage line is dwarfed by others in the market. Presbyterian Health Plan, for example, has about 470,000 total members. That leads to much lower per-member costs for administrative and other services.
Franchini also acknowledged in an interview with Journal reporter Marie C. Baca that Health Connections had been operating under the “financial supervision” of his office since June.
It’s not clear exactly what that means, nor did he provide details on how the existing liabilities of the company left behind in the sale would be handled if its cash flow doesn’t improve. Further, is True Health on the hook for pending claims attributable to the customers it has acquired?
These questions are important. Both UNM and Presbyterian submitted testimony detailing issues with pending claims, with Presbyterian raising the possibility that it could be forced to seek payment directly from Health Connections customers if it doesn’t get paid by the company for providing hospital care, emergency room and other services.
One question not addressed in any of the sale discussion is what happens to the roughly $77 million in federal loans that brought Health Connections into the world. Do they have to be repaid? If so, when?
Franchini can’t be faulted for wanting to keep another competitor in the market. But having chosen this path, the burden is on him to make sure that both health care providers and New Mexicans insured with Health Connections are protected.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.