Virginia: Four years later, Sentara Healthcare is in a whole heap of trouble w/the DOJ...

Oh wow...this is a blast from the past. I'm gonna have to essentially repost much of a blog entry from August 2018 to provide the backstory:

[In 2017], Virginia residents experienced massive amounts of heartburn and ulcers as two major insurance carriers, Optima (Sentara Health) and Anthem (HealthKeepers) played musical chairs with both their 2018 rate filings and which areas of the state they offered plans on.

In May 2017, things didn't look too bad: Both Anthem and Optima were available in fairly large chunks of the state, and while Anthem wanted to raise rates an ugly 38% on average, Optima was only looking to increase rates by around 10-11%.

Unfortunately, by August, the situation had changed dramatically--Congressional Republicans had introduced a half-dozen different ACA repeal/replace bills, while there were strong warning signs that Donald Trump was planning on pulling the plug on Cost Sharing Reduction (CSR) reimbursement payments to insurance carriers. This, combined with other types of uncertainty, resulted in Anthem deciding to pull up stakes and bail on the entire Commonwealth en masse. In response, other carriers resubmitted two 2018 filings: One assuming CSR funding would be cut off, one assuming it wouldn't be. Optima was now asking for around 19% premium increases with CSRs or 32% without them.

By early September, it was clear that Trump would indeed be cutting off CSR funding. With just a few weeks left before the final deadline to sign 2018 ACA exchange contracts, Optima suddenly announced that they were not only jacking up rates a whopping 81%, they were also pulling out of a large chunk of the state, leaving large areas at risk of "going bare" without any ACA carriers whatsoever.

...Then, on September 14, with just days to spare and thanks to what I assume were some pretty intense backroom deals being made, Anthem suddenly announced that they were back in the game after all:

Anthem Changes Course, Will Offer Obamacare Plans In 63 Virginia Counties And Cities

Anthem said it has revised its plan to offer individual health insurance in Virginia after “learning that 63 counties and cities” would be bare and have no access to coverage in 2018 under the Affordable Care Act.

It’s welcome news to Virginia residents but also a good move for Anthem, the nation's second-larges health insurer, which appears to be maintaining individual coverage in areas of the country where it will have a monopoly. Anthem has been scaling back in some of the 14 states where it operates under the Blue Cross and Blue Shield brand, but remaining in areas that are in jeopardy of not having an Obamacare choice for 2018.

Unfortunately, part of that deal appeared to include a whopping 56% rate increase for Anthem HealthKeepers, a large chunk of which was to cancel out the lost CSR reimbursement payments. Optima, meanwhile, was still raising rates 82% on the areas they were still available in...which included the Charlottesville area, where they were the only game in town. In the end, the two carriers were approved at around those levels for 2018.

That brings me to [2018]. Virginia was once again the first state to post preliminary rate changes for 2019, and both Anthem and Optima had a very different request: A mere 5.6% increase for Anthem and a 2% drop in average premiums for Optima.

Unfortunately, that 2% drop doesn't do much good for Charlottesville enrollees, who are paying an unacceptable (and unaffordable) $3,000 per month for a family of four this year for high-deductible policies. In response, a citizens group formed called Charlottesville Healthcare, which successfully lobbied to get a new law passed which I've labelled the #TinyGroup law. It basically allows self-employed individuals to enroll in Virginia's small group market instead. It's a troubling and far-from-ideal workaround to the problem, as C'ville Healthcare readily admits, but it's the best temporary relief that they've been able to come up with so far.

However, they're also extremely upset with Optima/Sentara over the massive rate increases last fall which put them in this situation in the first place, and have been crying foul for months now, hoping to dig into the company's finances and records to find out whether those crazy-high increases really were actuarially justified or not.

Meanwhile, a few weeks ago, Anthem made another big announcement: They've decided to expand into more parts of Virginia next year...including the Charlottesville region. Anthem lowered their average 2019 premium increase slightly (from 5.6% down to 4.9%)...but Optima didn't budge at that time.

A week or so later there were some further tweaks among some carriers in response to ACA Medicaid expansion being officially launched in Virginia...including Optima, which was now asking for a 7.2% rate reduction. And finally, a few days ago, Anthem lowered their rates further still, now asking for a mere 2.5% increase.

HOWEVER, behind the scenes, there's been a LOT of legal activity as the Charlottesville citizen group continues to track down the Optima/Sentara records, and as Optima has tried to justify their actions. All of this culminated in the following case documents being filed (h/t to @cvillehlthcare).

Here's a summary of Optima's original petition for a declaratory judgment:

Optima Health Plan ("Optima"), by counsel, pursuant to Rules 100(B) and (C) of the Rules of Practice and Procedure of the State Corporation Commission ("Commission")1, hereby files this petition ("Petition") for:

(a) a declaratory judgment affirming Optima's right to submit rate revisions to its 2019 Rate Filing and to have its previously submitted rate revisions considered by the Bureau of Insurance ("BOI"); and

(b) an order directing the BOI to promptly consider such filing as soon as possible and in accordance with the federal deadlines pertaining to the Federally-Facilitated Marketplace ("FFM") developed by the Centers for Medicare and Medicaid Services ("CMS").

As time is of the essence, Optima further requests that the Commission establish an expedited schedule for the disposition of this Petition, including setting a hearing at the earliest day possible to ensure compliance with federal deadlines. Once certification agreements are executed by insurance carriers and CMS, the certification process will be complete for the 2019 Plan Year and Optima will be premium relief it is seeking to consumers in the Virginia individual marketplace. Accordingly, in the absence of the Commission's consideration of Optima's Petition on an expedited basis, the BOI's arbitrary imposition of the August 10 date and rejection of Optima's revisions to its 2019 Rate Filing will negatively impact tens of thousands of Virginia consumers.

Well, it seems that the state Bureau of Insurance has decided that Optima's claims are pretty much bunk:

Optima's Petition is essentially an effort to circumvent a process put in place by the Bureau - and applied consistently to all carriers interested in providing health insurance coverage to Virginia consumers in the individual and small group markets - to ensure the orderly submission and review of health insurance rate filings in advance of a related deadline imposed by the federal government. The Bureau believes its process will foster long-term stability in Virginia's insurance market and promote competition for the benefit of all its citizens.

The Bureau established its 2019 rate filing process, which includes several filing deadlines, partly in response to problems that arose during the 2018 rate filing process. Last year, in advance of the same federal deadline at issue here, the Bureau did not establish its own filing deadlines for requesting service area (i.e., geographic market) changes or premium rate revisions. As a result, carriers exited certain service areas in Virginia with no notice to the Bureau, leaving consumers in these localities at risk of having no health insurance options on the federally-facilitated health insurance market. This drove up rates in many localities and left the Bureau little time to review and approve the filings or revisions of other carriers that remained or ultimately entered these areas before the federal deadline.

The Bureau's 2019 rate filing deadlines allowed it to identify - well in advance of the federal deadline - which carriers had agreed to provide health insurance for specific service areas, and gave it time to adequately review the rates proposed by those carriers. The deadlines were communicated to all potential carriers, providing every carrier an equal opportunity to seek clarification from the Bureau, if needed, and to submit its best-and-final proposal for Bureau review. Though afforded the same opportunities as every other carrier, Optima instead seeks to undermine the Bureau's process, ignore its deadlines, and demand, after the fact, that the Bureau accept and review its untimely filing just days before the related federal deadline (and only after reviewing a primary competitor's rates).

Accordingly, the Bureau asks that the Commission deny the Petition and uphold the Bureau's decision to follow a fair process that it specifically created to facilitate the long-term stability and competitiveness of the insurance market in Virginia.

The real eyebrow-raiser comes a few pages later, however:

B. Prior to the August 10 deadline, Optima had ample opportunity to file a revised filing incorporating any changes reflected in its untimely Second Revised Filing.

Optima's Second Revised Filing was submitted after the August 10 deadline not because the Company was prevented from making the same changes earlier, but because it was previously unwilling to do so. The reality is: Optima was unwilling to offer better rates, as reflected in its Second Revised Filing, until after HealthKeepers came forward on August 10 with a more competitive bid, a fact that the Petition fails to mention.14

At any point in time before the August 10 deadline, Optima could have offered the same statewide rate reductions submitted on August 16, 2018. However, though aware from its August 2, 2018 discussion with the Bureau (as well as its own financial knowledge) that it had the ability to do so, Optima did not submit a filing that included lower rates based on profit margin decreases. Optima's First Revised Filing on August 9, 2018 contained nothing to this effect. It was not until after August 10, 2018, when HealthKeepers proposed lower, more competitive rates in many of the Service areas where Optima competed, that Optima was even willing to entertain the idea in its Second Revised Filing, nearly one week later.

This belies the Petition's complaint that the Bureau simply "decided not to allow" the Second Revised Filing. Quite the opposite, Optima had multiple opportunities to make the very changes reflected in its Second Revised Filing. The Bureau, therefore, did not act unreasonably by refusing to allow Optima to ignore existing deadlines and, instead, to incorporate those changes into its Second Revised Filing only after HealthKeepers' filing and only when it served Optima's own interests to do so.

As I noted a few weeks later:

In other words, Optima knew what the timeline was, knew what the deadlines were, and waited until it was too late before deciding to cut their prices.

The Virginia State Corporation Commission agreed, stating:

Optima Health Plan’s post-deadline effort to more substantially lower its 2019 health insurance premiums on Virginia’s Affordable Care Act marketplace has been rejected by state regulators — and a local group that formed in protest of Optima’s rates is happy about the decision.

The case before the State Corporation Commission involved a back-and-forth about whether Virginia’s Bureau of Insurance, the body responsible for reviewing health insurance rates in the state, set reasonable requirements for filings, and whether private companies can revise filings to make them more competitive.

The consumer advocacy group, Charlottesville for Reasonable Health Insurance, actually approved of this decision, which may sound strange except that, as they put it at the time:

“As a grassroots consumer advocacy group that exists only because of Optima’s price-gouging in 2018, particularly in the Charlottesville area, we want to make it clear to the [bureau] and the [commission] that it is NOT in consumers’ best interest to allow Optima to reduce its rates after an established deadline and only because a competitor (Anthem) reentered their markets with better pricing,” the group wrote on its Facebook page on Sept. 5.

...“Enforcing the Aug. 10 deadline [to revise 2019 rates] and denying Optima’s petition means Optima and all other insurers will understand in future years that it is a risky proposition to overcharge consumers in uncompetitive markets, and that doing so may result in unexpected market share losses if a competitor increases its service areas late in the process,” the group wrote. “Insurers will now be motivated to offer competitive rates even when it seems they may have monopolies.”

In other words, as I concluded:

Optima decided to take unfair advantage of what they thought would be their monopoly market position. When that status changed, they scrambled to reverse themselves...which, if they'd been successful, would've meant that they could game the system either way: Play fair when there's competitors around, price gouge when there isn't. By slamming the door shut on their 2019 rates, they'll presumably learn a painful lesson about keeping their prices reasonable whether they "have" to or not.

UPDATE: Oh yeah...I completely forgot that this little stunt of theirs also ended up meaning they had to pay out $99 million in Medical Loss Ratio rebates to their policyholders in 2019 (as well as another $40 million in 2020 and $50 million in 2021).

Whew!

I assumed that would be the last I'd ever be writing about this bit of greedy stupidity.

I was wrong. Two days ago, the following federal lawsuit was filed in the United States District Court, Western District of Virginia, Charlottesville Division:

The United States is conducting an investigation pursuant to the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., regarding whether Sentara Healthcare (Sentara) or any of its subsidiaries or affiliates, including Optima Health Plan (Optima), made material false statements in health insurance rate filings for the 2018 and 2019 plan years for the Patient Protection and Affordable Care Act (ACA) individual health insurance marketplace in Virginia, thereby causing the submission of false claims for payments by the federal government to Optima in the form of Advanced Premium Tax Credits (APTCs). The United States submits this petition to enforce due to Respondents’ failure to comply with lawfully issued Civil Investigative Demands (CIDs) for relevant information in the course of this ongoing FCA investigation.

Hoo boy.

In 2018, Optima’s insurance premiums for individual plans in the state of Virginia increased on average by 81.8% compared to 2017. Although the average increase was 81.8%, Optima’s premiums actually increased as high as 265.5% depending, among other things, on where the insured lived. For example, Optima’s Charlottesville customers saw premium increases at the top of the range. For those Virginians, Optima’s rates were the highest in the country, with the least expensive insurance option costing more than twice the national average.

As discussed below, under the ACA, the higher Optima’s premiums were, the more money the government paid to Optima in the form of subsidies. As relevant here, the federal government paid Optima over $535 million in 2018 and nearly $132 million in 2019 in subsidies, large sums of money which are implicated by the allegations being investigated by the United States.

I'm not gonna repost all 33 pages, but I think you get the picture.

Things aren't looking optimum for Optima at the moment.