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Medicaid Insurers Looking At More State Oversight

Oregon State Capitol in Salem. | COURTESY OF OREGON LEGISLATURE
June 17, 2019

SALEM – The insurers that deliver Medicaid-funded health services to nearly 1 million Oregonians will be subject to stricter financial oversight under a bill that's a signature from the governor away from becoming law.

Senate Bill 1041 would give the Oregon Health Authority new powers to regulate coordinated care organizations as if they were commercial insurance companies. The bill would give the authority the ability to put an organization into receivership if financial struggles pushed it to the brink of insolvency.

Such an intervention would be a potentially major expansion of Oregon's regulatory oversight over coordinated care organizations, which the state established in 2012 as part of its health system transformation to spur innovation and lower Oregon Health Plan costs.

But the changes in SB 1041 don't go as far as some advocates would like. They’ve pushed for an open book policy that would make the organizations’ finances transparent.

SB 1041 "isn't going to change anything for CCOs," Art Suchorzewski, director of government affairs for the defunct coordinated care organization FamilyCare Inc., told The Lund Report. FamilyCare pushed for an aggressive bill this session, Senate Bill 1030, which would have required care organizations to release a wide range of financial information. Those would have included the budget documents they submit to the federal Centers for Medicare & Medicaid Services, their transactions with subcontracted risk-sharing organizations and extensive reporting of each group’s highest-paid employees, among others.

"If (there were) truly a situation where a CCO was insolvent, then there would be reason to adopt the bill," Suchorzewski said of SB 1041. But he argued Oregon's insurance regulatory agency, the Department of Consumer and Business Services, could already apply its regulatory oversight of commercial insurers to the coordinated care organizations if signs of financial distress emerged in any of them, without the Oregon Health Authority getting involved.

FamilyCare has a strained relationship with the health authority, having been shut down by the state last year 2018 over a long dispute centered on its Medicaid reimbursement rates. The health authority accused FamilyCare of overspending, but FamilyCare has sued and accused the state of favoring Health Share of Oregon as a lone Portland metro area coordinated care provider – a claim the state denies. A lawsuit is pending in a U.S. Appellate Court but may not be heard for several years. In the meantime, FamilyCare has been publicly critical of the health agency’s rate-setting method.

Many lawmakers this session voiced concerns about SB 1030's requirement that care organizations go back and retroactively release information they hadn't been required to divulge at the time. Coordinated care organizations submitted financial audits in 2016 and 2017, and the Oregon Health Authority issues a report each year outlining the organizations’ performance in 17 areas of physical, public and behavioral health. But financial details are not released.

Health authority administrators say SB 1041 strikes a much-needed balance. The 15 organizations currently operating as coordinated care organizations are of vastly different sizes and organizational structures, Dave Baden, the Oregon Health Authority's chief financial officer, told lawmakers recently. The result has been widely divergent methods of reporting the types of financial information the agency says it needs to compare one organization's performance against another.

SB 1041 requires all care organizations to align their financial reporting with the standards the National Association of Insurance Commissioners has set for health insurance carriers. Those requirements would apply to care organizations starting late next year.

"The comparison between them is hard," Baden said of the care organizations under current law. "With the move to an (insurance industry) standard, where we will do the same sort of publication of the financial information across the board ... the comparison between them should be easier."

Care organizations' contracts with the state require them to perform an independent financial audit, but SB 1041 puts that requirement into state statute. It also requires the health authority to conduct its own financial audit of each organization at least once every five years.

Most significantly, the bill would give the health authority power to place a struggling organization under state supervision. Oregon Health Authority Director Patrick Allen recalled Oregon insurance' regulators' 2016 order placing Moda Health Plan under supervision amid capital concerns, leading the carrier to take drastic steps to raise funds and stay in business rather than fail and leave customers to sort through collateral damage.

With care organizations under SB 1041, "It's the same standard as when we entered into an order with respect to Moda," Allen told lawmakers recently. "What are the steps we can take to protect assets and pay provider claims, and make sure Oregon Health Plan members are whole?"

Care organizations have had a largely muted response to the bill. Few offered testimony as the bill worked through Senate and House committees, though a lobbyist representing seven of the smaller, for-profit organizations testified back in April that they were concerned the state oversight would unfairly target the for-profit entities for supervision if they showed any sign of financial strain.

Mary Williams, the lobbyist with Coalition for a Healthy Oregon, told The Lund Report on Monday that the group's concerns had been addressed in behind-the-scenes discussions care organizations have held with health authority administrators in recent months.

"We were a part of a workgroup with the health authority to address concerns," Williams said. "We've worked in coordination on the final bill."

It is in care organizations’ interest for the public to understand how they’re spending Medicaid funds, Josh Balloch, a lobbyist for Grants Pass-based coordinated care organization AllCare Health, told The Lund Report.

But organizations like AllCare were concerned SB 1041’s reporting requirements wouldn’t capture all of the organizations' investments in improved health care outcomes, which are essential to the state and federal government’s aims of holding down cost growth. Oregon spends about $5 billion in federal funds on care organizations each year.

“It is understandable that people can see where that money is being spent,” Balloch said. “As long as we keep on those pillars, make sure we aren’t creating too much cost into the system and really creating a system of reporting that captures all the things going on in CCOs, we’re going to be in a good place.”

Jeremiah Rigsby, chief of staff for CareOregon, which manages physical benefits for two-thirds of Health Share of Oregon's more than 300,000 Portland area members, told The Lund Report in April that SB 1041 set reasonable requirements for care organizations like Health Share.

“However, we should be clear-eyed about the cost and administrative pressure that these provisions will add to both CCO and state budgets,” he told The Lund Report in April.

Asked for comment as SB 1041 cleared its final vote last week, Rigsby said the organization's position on the bill remains unchanged.

No other coordinated care organization responded to The Lund Report’s request for comment on the bill.

Cost savings and financial accountability are at the top of state health regulators' minds as they prepare to announce the second round of Medicaid funds for the next round of care organization contracts. Those contracts are expected to be announced in July and run from 2020 through 2024.

Meanwhile, lawmakers have grappled with filling a $900 million funding gap in the Oregon Health Plan this session. Taxes on hospitals and health insurance premiums filled roughly half the gap, and a series of tobacco tax increases championed by Gov. Kate Brown could add another $320 if they pass in the legislative session's final weeks.

Besides raising revenue, ensuring the care organizations wisely spend their Medicaid funds represents the other end of Oregon's health care cost reduction efforts, Rep. Andrea Salinas, D-Lake Oswego, said earlier this month in comments on the House floor supporting SB 1041.

"As the second round of CCO contracts are signed, this bill will help to provide needed oversight to ensure financial stability and solvency of our coordinated care model in Oregon," Salinas said.

The bill passed the Senate 25-4 in April and the House 48-9 this month. Brown hasn't said if she will sign the bill, but her signature appears to be assured given the Oregon Health Authority's support for the bill and its bipartisan support in both chambers.

Have a tip about the health-care industry or legislation? You can reach Elon Glucklich at [email protected].