Sendero Health Plans—the financially embattled nonprofit health insurance plan that covered about 24,000 Travis County residents in 2018—may break even or turn a profit this year, but county commissioners maintain concerns about its long-term feasibility.
The insurance program, operated by Travis County’s taxpayer-funded health care district Central Health, implemented a new business strategy over the past several months after Central Health reversed a controversial decision to phase out operations of the plan entirely by 2020.
At the end of fiscal year 2017-18, Sendero’s net income suffered $19 million in losses, Sendero CEO Wes Dulkalski told Central Health Board members in December. According to Feb. 26 presentation from Central Health to Travis County Commissioners, revenue estimates for FY 2018-19 currently align with an actuarial report that predicted Sendero could break even or bring in up to $5 million in revenue.
Although Travis County Judge Sarah Eckhardt said she is pleased to hear Sendero is showing signs of progress, she worries about its viability. Travis County Commissioner’s are responsible for approving Central Health’s budget each year, including funding for Sendero.
“I’m happy that [revenue projections]are net positive but these are extremely thin margins,” Eckhardt said.
Precinct 3 Commissioner Gerald Daugherty echoed Eckhardt and said he wants to speak to the Central Health board members.
“I am particularly wanting to talk to the board members who were not supportive of moving forward,” he said. “I want to find out how they feel now about this program.”
How the strategy was developed
Central Health commissioned two independent actuaries to evaluate a business strategy that would help Sendero secure more funding from the federal government.
A federal program known as the Affordable Care Act Risk Adjustment Program requires ACA plans with the healthiest members to pay back funds to the federal government to be redistributed to health plans with the least healthy members. In the past, Sendero’s relatively healthy population meant it had to make those payments, straining its financial operations.
For Sendero to secure funds from the risk adjustment program, its patient pool needs to have a higher average risk score. This score is a way to measure how much it costs to insure a patient, Central Health CEO Mike Geeslin said.
One key population that could increase Sendero’s average risk score are members of Central Health’s Medical Access Program, or MAP, according to Central Health. MAP is not an insurance plan and is not operated through Sendero, but it allows Travis County residents with incomes 100 percent below the federal poverty level or lower to receive limited health care services without paying any premiums.
Dulkalski said one of the ideal scenarios outlined by actuarial reports predicted that if Sendero could enroll 15,000 traditional, premium-paying members and 500 new MAP members, it would turn a profit in FY 2018-19 because of increased funding from the federal risk adjustment program.
Even though Sendero would pay premiums on behalf of MAP patients, funding from the federal government would offset the added expense. This is because the MAP patients’ typically higher risk scores would increase the average risk score of the insurance plan’s total patient population.
The latest numbers show that Sendero took on 12,000 total traditional members and 223 members who transferred over from MAP, Dulkaski said. The total average risk score of Sendero’s patient population is not yet determined, although it will likely be higher than in years past, he said.
“Even if [the average risk score]comes in at half of the projected [average risk score]of 15 we will still break even,” Dulkalski said.
Sendero will find out how much funding it will receive from the federal government some time between May and June, Geeslin said.
“We’re definitely at the forefront of leveraging this availability of funds for this population that is historically underserved,” Dulkalski said. “… We’re still in front, but it’s been a painful ride for everybody.”