Last week, Minuteman Health filed its 2016 unaudited annual financial statement, projecting losses of $39 million. This non-cash accounting loss was largely driven by charges for reserves of $29.8 million for Minuteman’s projected 2016 Risk Adjustment payout and $23.7 million for additional potential Risk Adjustment liability for 2017.
Minuteman Health is an HMO with a network of 11,700 providers at over 21,500 locations throughout NH and Massachusetts. Minuteman increased membership by 45 percent Between Feb. 2016 and Feb. 2017, adding 12,438 members. The company also continued its network expansion, adding providers in both states.
Tom Policelli, CEO of Minuteman, says the most significant challenge facing Minuteman is the federal government’s Risk Adjustment formula, which was intended as a balancing measure to benefit insurers who attract sicker members than other insurers. According to Policelli, this system negatively affects smaller carriers like Minuteman.
The reserve Minuteman has established for 2016 Risk Adjustment is, at $29.8 million, one-third of all premiums and $1,188 per member for the year. Total pharmaceutical costs, by contrast, were $13.7 million. Those drug costs amounted to 20 percent of all medical expenditures, which is typical for the industry.
The latest Risk Adjustment forecasts were driven by updated simulation data for NH and Massachusetts.
Greg Pence, Minuteman’s acting CFO, says that while simulation data has proven volatile in the past both period-over-period and with respect to final numbers, the company felt it important to take it into account for this period. He adds that Minuteman hired outside actuaries for this analysis, and reviewed it with state regulators.
Last year, Minuteman filed a lawsuit against the federal government challenging the Risk Adjustment formula. It also founded CHOICES, a national association of health insurers focused solely on advocating for reforms to Risk Adjustment, Risk Corridors and Reinsurance.
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