Advantage Health to exit Medicare business after $46M in losses

Advantage Health Solutions Inc. was placed under the supervision of the Indiana Department of Insurance on Friday after the company lost $46.3 million during the first eight months of the year and decided to terminate its Medicare Advantage business.

Indianapolis-based Advantage Health already has received $33 million since August in cash infusions from its owners, the largest of which are the St. Vincent Health and Franciscan St. Francis Health hospital systems, according to the order of supervision issued by Indiana Insurance Commissioner Stephen Robertson.

Also, Advantage Health put a new management team in place this fall, according to insurance department officials.

But those actions haven’t significantly improved its financial picture. Its Medicare Advantage plan, in which Advantage Health provides private health insurance to 22,500 seniors, continued to lose money. So Advantage Health came to an agreement on Wednesday with the Centers for Medicare & Medicaid Services to terminate its Medicare Advantage policies by Dec. 31.

Medicare Advantage is an alternative to traditional Medicare in which the federal program pays private insurers to handle the health benefits of seniors who choose their plan. More than three of 10 Medicare beneficiaries are now covered by such plans.

The decision comes in the midst of the open enrollment period for Medicare Advantage, which began Oct. 15 and runs until Dec. 7. However, Robertson said in an interview that Advantage Health customers will be given until late February to switch to another insurer for Medicare Advantage coverage.

Hoosiers seniors who receive Medicare coverage from Advantage Health can call the company or the Indiana insurance department or the State Health Insurance Assistance Program for help in switching to one of the 40 other insurers that also offer Medicare Advantage policies in Indiana.

Robertson also noted that Advantage Health’s owners have committed to paying all medical claims for their customers.

“We have firm commitments that no claims will go unpaid,” he said. “The department will insist on it and demand it and enforce it.”

A St. Vincent spokeswoman was not able to immediately comment on Friday afternoon.

IBJ reported in August that Advantage Health was losing money on its Medicare Advantage business after doubling its enrollment over the previous two years.

Health plans that ramp up their Medicare business face temporary financial challenges. When a plan first signs up a Medicare Advantage customer, the Medicare program assumes that person will have modest medical spending.

It takes Advantage Health about 18 months to fully document that its members have more illnesses than the Medicare program assumed, and to get “true up” payments to cover the extra services needed to treat those illnesses.

The other problem is Obamacare’s new taxes on health insurers. Advantage Health shelled out a whopping $8.3 million for those taxes for 2014.

Some of that stems from the 50,000 Hoosiers Advantage Health insures in small and medium-sized employers. (It also handles another 36,000 Hoosiers in self-funded employer health plans, which are taxed separately.)

But a big chunk of the taxes came from Advantage Health’s Medicare customers. Medicare rules do not allow Advantage Health or other health plans to include those taxes in its pricing for Medicare Advantage until after it has paid them.

For a plan like Advantage Health that is growing its Medicare business, that means a lot of new customers whose premiums aren’t covering the Obamacare taxes.

Overall, Advantage Health posted losses in 2014 of $10.7 million. While it had profit of more than $4 million in 2013, it lost $9 million in 2012.

Doug Webber, chief of staff at the Indiana Department of Insurance, said the department had been concerned about Advantage’s financial situation, but was always reassured by the willingness of its owners—St. Vincent and Franciscan—to contribute the capital the company needed.

He encouraged seniors that have Medicare coverage through Advantage Health to call the State Health Insurance Assistance Program for help. The phone number for that program is (800) 452-4800.

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