The proposal, floated in closed-door negotiations, would require certain non-profit Medicaid managed care plans to disgorge reserve funds in excess of 150 percent of the mandatory minimum. Industry insiders say Fidelis would be one of only two plans likely to owe money under such a rule—the other being MetroPlus, which is operated by New York City Health + Hospitals.
Insurers are required to keep funds in reserve as a hedge against facing unexpectedly high claims or the loss of revenue. The minimum for Medicaid plans is 8.25 percent, or roughly one month’s worth of premium income.
The push to claim reserve funds for the state treasury comes less than three years after the collapse of Health Republic Insurance of New York, a money-losing non-profit insurer that had inadequate reserves and left behind hundreds of millions in unpaid claims.
The new proposal is a variation on one in Cuomo’s original executive budget, which would have empowered the Health Department to reduce premium payments to non-profit Medicaid plans deemed to have excessive reserves. That plan was rejected by leaders of both the Assembly and Senate.
Fidelis is also facing pressure from Cuomo to turn over proceeds of its pending $3.75 billion sale to Centene Corp., a for-profit insurer.
Under current law, that money would stay in the control of state’s Catholic bishops, who had planned to endow a charitable foundation in support of health care for the needy. Cuomo argues the state is entitled to the funds because so much of Fidelis’ revenue came from government programs such as Medicaid, Child Health Plus and the Essential Plan.
The governor’s plan requires changes in law, the first draft of which he shared with legislative negotiators in recent days. It calls for 80 percent of Fidelis’ sale price to go into a “public asset fund,” over which his appointees would hold a controlling three-fifths majority. The funds could be spent without further appropriation by the Legislature. The other 20 percent would go to a charitable foundation to be jointly controlled by the bishops and state officials.
Cardinal Timothy Dolan and other church officials have signaled that they might cancel the Centene deal if the state insists on taking too much of the proceeds.
“When we were able to negotiate a contract with Centene … both sides said there’s always the peril of the government wanting to take some of our money, and we have to be realistic about that,” Dolan told Politico. “So we put in there if the government tries to seize anything above a certain amount, we wouldn’t go through with it. So the worst that could happen to us is we’d go back to running Fidelis, which we’ve done very well.”
It’s also unclear is whether the Assembly and Senate will approve the plan to seize health plans’ conversion proceeds or excess reserves.