Update Cooper’s stake in AmeriHealth comes under fire at Assembly hearing

Cooper University Health Care came under fire at Wednesday’s state Assembly budget hearing for its 20 percent stake in the for-profit AmeriHealth New Jersey insurance company in Cranbury.

Cooper University Health Care came under fire at Wednesday’s state Assembly budget hearing for its 20 percent stake in the for-profit AmeriHealth New Jersey insurance company in Cranbury.

Assemblyman John McKeon (D-Madison) asked Department of Health Commissioner Cathleen Bennett if it was appropriate for a not-for-profit health system to invest in a “failing” insurance company like AmeriHealth.

Recent reports have shown the insurer has lost as much as $46 million in 2015 and $26 million in 2016. Meanwhile, Cooper, whose board of trustees chairman is George Norcross, has funneled a total of about $13.5 million into AmeriHealth, McKeon said.

He also highlighted that Cooper previously received $21 million in charity care dollars, is slated to receive $13 million this year and has received $40 million in EDA tax credits (over a 10-year period).

“Should the New Jersey taxpayer be funding for-profits? That’s what’s happening here,” McKeon said.

“Even if that answer was yes, should it be put in a failing insurance company, as opposed to all the other missions … for improving the quality of health, God knows, for people in the general Camden area?”

Bennett replied that she was not familiar with the insurance company and that hospitals have changed the way they operate over the years, and have contributed $2.1 billion annually in community benefit.

“I know our health systems are no longer just hospitals alone,” Bennett said. “Throughout the state, our hospitals have become part of larger systems and networks as they look at new ways to deliver care and do it in a way that addresses things like cost and things like access and things like quality.”

As for whether it is appropriate or not, Bennett said there should be a policy discussion around it.

“At the moment, I am not in a position to give you my opinion on that,” she said.

McKeon posed similar questions to Department of Banking and Insurance Commissioner Richard Badolato, who repeatedly stated that there were no regulations barring such a transaction, and that DOBI was not in charge of regulating the hospitals.

DOBI officials also stressed that McKeon referring to AmeriHealth’s finances negatively was not something it could opine on, as such an opinion could move markets.

When asked if any consideration is given to the fact that a nonprofit, which benefits from special tax breaks and receives taxpayer money, is looking to invest in a for-profit, Badolato said it is not.

“It is not a consideration when we decided that Cooper satisfied statutory and regulatory requirements,” he said.

In response to a follow-up question from Assemblyman Troy Singleton (D-Moorestown), Badolato added the only concern DOBI has is if the acquiring party is able to exert control responsibly.

Specifically, if the acquiring party has money to see the acquisition through and sustain it, as well as expertise to provide management services.

When asked if legislation is needed to address similar circumstances, Badolato simply replied that he would be happy to implement whatever regulations come from the Legislature.

A similar instance of hospitals involved in health insurance previously occurred in the state, according to Singleton, who brought up the now-subsidiary of Cigna, QualCare.

QualCare was formed by and owned by 14 nonprofit hospitals in the state, and its board of directors, which was dissolved when Cigna purchased it, included current hospital executives.

The hospitals used it as a third-party claim administrator and a self-insurance tool. QualCare’s network was also used by Oscar Health when it entered the New Jersey market.

Following the hearing, Singleton told NJBIZ his line of questioning was to establish that there was, in fact, a precedent in the state of hospitals owning an insurance company.

“Obviously it is clear we had precedent in the state, most recently with the QualCare situation where our non-profit hospitals were (owners) as opposed to the Cooper perspective having a minor stake in the company,” he said.

Cooper spokesman Thomas Rubino reiterated the statement by Badolato that the hospital invested in AmeriHealth after a public hearing and approval process through DOBI.

“One might wonder why Cooper is being singled out given the fact that 16 non-profit hospitals, most located in North Jersey, invested in the health insurance company Qualcare, before it was sold to Cigna,” Rubino said. “Additionally, most, if not all of those non-profit hospitals, received charity care and other state funding, as has Cooper. We don’t recall the investments by those hospitals in Qualcare being questioned.”

Rubino also mirrored Bennett’s comments about the changing landscape of hospital operations.

“Scores of non-profit hospitals have interests in for profit partnerships and joint ventures to boost revenues to carry out their important missions to care for New Jersey residents. So why is Cooper being questioned and singled out? Why now? In 2013, Cooper acquired a minority position in AmeriHealth. Today, Cooper’s effective ownership interest in AmeriHealth is less than 1 percent,” Rubino said.

AmeriHealth spokesperson Jill Roman said the losses the provider saw were not unique.

“Last year proved challenging for carriers across the nation,” Roman said. “There were several contributing factors that affected us directly. Pharmacy spend has definitely had an impact, as prescription drug costs continue to rise due to specialty and high-cost name brand drugs. Challenges with Special Enrollment Period enrollees and claims associated with out-of-network services have also had adverse effects. With challenges come opportunities to improve and we are excited about the momentum we are seeing in 2017.

“Cooper University Health Care acquired a minority stake in our company in 2013, when we collaborated to offer a co-branded product that continues to be very popular among our consumer customers today. AmeriHealth New Jersey serves more than 270,000 members across the state.”

AmeriHealth is also waiting to see the results of gaining policyholders from the liquidation of the failed health co-op, Health Republic of New Jersey.

The insurer received all the silver plan policyholders that HRNJ had. Silver plans are the most popular, with roughly 71 percent of enrollees in a silver plan nationally, according to the Centers for Medicare and Medicaid Services.

How this affects the company’s finances is yet to be determined.