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Insurance Commissioner Approves Sale of Trillium Health Plan to Centene

In her ruling, Laura Cali said the sale was fair, just and equitable
June 25, 2015

Late Thursday afternoon, Oregon’s Insurance Commissioner announced that she had approved the sale of Agate Resources to a Fortune 500 company. Agate is the parent company of Trillium Community Health Plan, a coordinated care organization in Lane County.

In her ruling, Cali mentioned that she considered over 50 public comments in support and opposition to the transaction but found “no material or reasonable objections,” adding that the sale would not “substantially reduce the security of and service to be rendered to policyholders.”

Centene Corporation has agreed to pay $80 million for the transaction, and those dollars will be dispersed to Agate’s shareholders – Trillium has 5,000 shares of common stock outstanding, LIPA, 3,000 shares and Agate, 2,000 shares.

Earlier, the Eugene Register Guard reported that the “Oregon Insurance Division has blacked out the identities of Agate’s 217 individual owners and the payouts they would receive under the sale.”

The majority of these shareholders are Lane County physicians and also include Coplin, who earned $492,324 last year. That compensation package included a $96,230 bonus and stock awards of $46,000. The previous year, Coplin earned $366,530. Trillium, which has more than 100,000 Medicaid members, reported a profit of $22 million in 2014, up from $3.9 million in 2013 and $1.15 million in 2012. Compared to other plans, its earnings before interest and taxes were $36 million.

At the end of 2015, Trillium expects to have $47 million in capital and surplus. Agate provides administrative services for Trillium and LIPA – a group of 217 physicians.

Centene’s CEO and Chairman, Michael Neidorff, meanwhile, earned $19.3 million in 2014, including $13.9 million of stock. During the first quarter, its managed care membership reached 4.4 million, an increase of 1.4 million members, or 44 percent compared to the first quarter of 2014. Premium and service revenues were $4.8 billion, representing 42 percent growth compared to the first quarter of 2014.

Over the past 30 years, Centene has grown from a single health plan in Wisconsin to become a $10 billion Fortune 500 company trading on the New York Stock Exchange. With nearly 10,000 employees across the company, its health plans serve 2.9 million members in California, Washington, Florida, Illinois, Massachusetts, Ohio and Texas

Centene and Agate intends to create a $2 million community fund, each putting in an equal amount, to pay for services not covered by Medicaid, with a local community group determining the criteria.

Consumers Were Skeptical 

Before the Commissioner's decision, advocates weighed in, sharing concerns that people on the Oregon Health Plan would continue to face access problems if Centene Corporation took over. Last year, Trillium and Cascade Community Health in Klamath Falls were the only two CCOs that had to shut their doors to new members after being unable to keep up with the Medicaid expansion.

That concern was echoed by Rene Salm, an Oregon Health Plan member, who’s had difficulty reaching Trillium by phone to verify if she has a primary care physician. “My own difficulties navigating the system strongly indicate to me that the system itself is not working well for the poor and large client base it is supposed to serve. Selling to an out-of-state company would be a further step backwards,” she told Laura Cali, Oregon’s Insurance Commissioner.

Rep. Phil Barnhart, D-Eugene also expressed skepticism. “The state of Oregon should carefully and skeptically study the buyer and extract strong guarantees that are enforceable before allowing this sale to go through. Otherwise, this transaction should be denied.”

A community activist, Priscilla Gould is troubled by the thought of a profit-making corporation running a Medicaid health plan with its vulnerable population. “Our experiment in healthcare reform could be undermined by Wall Street’s need for short-term gain,” creating, she said, “an unfortunate precedent for all of Oregon.”

Centene’s only interested in future profits, that’s the reason it wants to purchase Trillium, said P. Evalyn Cole, CEO of the Spine Surgery Center in Eugene. The sale, she said, “will mean more reductions in payments to healthcare providers and more reductions in authorized services to patients.”

But everyone was as skeptical. Dr. Scott Williams, medical director of emergency medicine at Sacred Heart Medical Center believes Centene can add significant strength to Trillium’s data infrastructure, enabling providers to “get the real-time information necessary to manage our members’ illnesses and maintaining our members’ health.” And, if a fiscal storm confronts Oregon, he said, Trillium can survive because of Centene’s strong capital base.

Centene Faced Controversy

Controversy hasn’t eluded Centene. Last year, its health plan in Texas found itself in the center of media attention after denying emergency surgery for a seven-month-old infant with a brain tumor.

Fox News got wind of what was going on, sharing the news with their viewers nationwide and, almost immediately, Superior Health Plan changed its mind, and agreed to pay for the surgery, having earlier told the parents that Texas Children’s Hospital was not in its network.

Coplin is convinced nothing like this will happen in Oregon, and is remaining at the helm for another year once the transaction goes through.

“Centene is not bringing people in to run this organization; I have assurances from their management,” Coplin told The Lund Report. “Sure, they could do it if they really wanted to, but they’re not stupid. We have the local expertise; we know the market, they don’t, and we’ve been successful and they don’t fool with success.”

Agate entered into this purchase agreement because of the increasing administrative and regulatory demands facing the coordinated care organization and the efficiency of bringing a national organization on board, Coplin added.

“I’m proud of the fact we’re bringing the resources of a Fortune 500 company to Lane County. They have a very robust technology system and a whole suite of care management software. They really stressed our ability to keep up, and each year those regulatory requirements are pushing up our administrative costs. They have some support infra-structure that would take us five years to build, and we think we can get access to them now.”

Diane can be reached at [email protected].