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At least 3 ACA-created co-ops turn Q1 profits

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At least 3 ACA-created co-ops turn Q1 profits

Consumeroperated and oriented health plans in Maryland, New Mexico and Massachusetts willreport profits in the first quarter, in a sign that some of the remaining AffordableCare Act-created nonprofits could be finding their footing on the state exchanges.

Maryland-basedEvergreen Health Cooperative Inc.finished the quarter with $547,000 of net income, it saidApril 26, in a turnaround from its $2.3 million loss in the same period a year ago. That represented thefirst profitable quarter in the company's short history.

generated$420,000 of first-quarter earnings, CEO Martin Hickey said in an email, comparedwith a $2.3 million lossin the 2015 first quarter. Massachusetts' MinutemanHealth Inc. will also finish the quarter in the black, according toa person familiar with the company's financial results. The company $3.8 million in the year-ago period.

The earlyprofitability comes as the co-ops' exchange membership continues to grow. EvergreenHealth boasted 40,000 enrollees as of March 31, up from 29,679 at the end of 2015,while Hickey said that New Mexico Health Connections grew its customer base to about48,000, from 32,000 on Dec. 31, 2015. Minuteman's enrollment, meanwhile, will showan 85% jump to about 26,000 members, the source familiar with the results said.

The co-opsare required to officially submit their financial results to the NAIC by May 15,and it is unclear how the entire class of ACA-created nonprofits is faring. EvergreenHealth, New Mexico Health Connections and Minuteman have been among the more stableof a group perhaps best known for its high-profile collapses. More than half ofthe original 23 co-ops shut downin 2015 amid financial difficulties.

All ofthe remaining organizations suffered full-year 2015 losses after seeing a rush ofclaims costs tied to new enrollees in the fourth quarter of that year.

"Ithink half are doing fairly well," Evergreen Health CEO Peter Beilenson saidin a mid-April interview. "The other half are not doing so well."

Healthplans' experiences on the exchanges have come under intense scrutiny since insurancegiant UnitedHealth Group Inc.said it would pull itsproducts from most state marketplaces in 2017, after seeing nearly $900 millionof losses over the past two years. Other large insurers, like Anthem Inc., have taken a more favorable view and plan togrow their presence onthe exchanges, while Medicaid specialist CenteneCorp. said that its exchange profits have exceeded expectations so far.

Whilesome co-ops have diversified into other markets, they remain largely reliant onthe exchanges. Over the past six months, they have increasingly focused their effortson alleviating perceived regulator-imposed pressures on small health plans. Beilenson,Hickey and Minuteman President and CEO Thomas Policelli are leading a to alter the ACA's risk adjustmentprogram, which they argue is unfairly penalizing small and high-growth insurersand hampering their chances of turning a profit.

The programredistributes funds among state exchange participants annually based on the riskprofile of each company's population, in an effort to spread costs and stabilizeinsurers' financial situations. But it did the opposite for several thinly capitalizedco-ops in 2015, when it stuck them with surprise charges.

Smallinsurers worry they could again face hefty financial obligations in 2016 unlessthe federal government steps in or state insurance commissioners find a way to adjustthe payouts after the fact. A "reduced volatility" plan pitched by a coalitionof co-ops, small insurers and startups like OscarInsurance Corp. would empower a state regulator to review the risk adjustmentresults and then impose a blanket limit on the percentage of annual premium eachinsurer in the market could either receive or have to pay out. The NAIC is stillcontemplating whether to allow such a program and how exactly it might work.

If the risk adjustment program remains unchanged, Beilenson saidthat Evergreen Health's initial profits could be wiped out. The co-op's early estimatesshow a potential obligation of $4 million to $12 million for 2016, and Beilensoncalculated that he might have to hike 2017 rates between 5% and 15% just to offsetanother possible risk adjustment payout.

New Mexico Health Connections estimates a risk adjustment payoutin 2016 of $4.3 million, Hickey has said, which would come directly out of its profits.

Minuteman Health factored a risk adjustmentpayout equal to 30% of its premium into its first-quarter earnings, the person familiarwith the results said, but is nevertheless carefully managing its financial situation.After enrollment topped its target of 22,500 members in the quarter, the co-op shutdown advertising over worries about signing up too many people.