With enrollment up, funding down, Sendero gets $26 million boost

Jan 26, 2018
Central Health is Travis County’s hospital district, which oversees programs for health care services for the county’s poor, uninsured and underinsured residents.

Travis County’s health care district will extend yet another lifeline — this time for $26 million — to its nonprofit health coverage provider Sendero Health Plans, which has seen booming enrollment despite federal funding cuts.

Central Health created the Sendero health maintenance organization with taxpayer money in 2012 with a goal of giving more low-income people access to affordable health care coverage.

The $26 million infusion approved this week comes on top of the $4 million allocated in the 2018 budget that the Travis County Commissioners Court approved in September. The funds will come from reserves and potential savings from other parts of the budget and will not lead to any cuts to other programs or services, officials said.

Officials said that, without the latest aid, Sendero would not have been able to show that it had enough money to comply with state health care financing requirements.

ALSO READ: Central Health budget hearing sparks debate over medical school funds

To date, Central Health has transferred $88 million in taxpayer money to Sendero. The rising costs have caused some critics to wonder aloud why the health district continues to pour money into it.

“I guess taxpayers should just pay and pay while governmental oversight completely collapses in Travis County,” said Bob Ozer, a lawyer and activist.

Central Health, which oversees programs for health care services for the county’s poor, uninsured and underinsured residents, has a $238 million budget largely financed by property taxes in Travis County. The typical homeowner is paying $327.71 this year for Central Health, a $12.50 increase over last year.

Central Health officials defended Sendero this week, saying, as they have repeatedly in the past, that its purpose was never to make money but rather to provide a low-cost alternative to the eight-county area it serves in Central Texas.

Sendero, which offers some of the lowest-cost plans in Travis County, has seen an increase in customers in the past year. Membership grew in 2017 by about 50 percent to about 53,000 members, up from about 35,000 the previous year, officials said. The HMO also provided 40 percent more services per member this past year.

ALSO READ: Dell Medical School touts growing number of residents in new report

“Sendero is a community health plan, and, for me, that means that their heart is about the community,” Central Health treasurer and board member Charles Bell said. “It’s about caring for low-income individuals. They’re not about making big profits like other health care companies.”

Bell said Central Health has “seen the fruits of our labor,” as Sendero has paid for more than $470 million in health care services for about 135,000 individuals since 2012.

The nonprofit has struggled to find its footing financially since its inception but has recently been on the upturn. According to the most recent Texas Department of Insurance annual data, the nonprofit had been losing money up until the end of 2016, when its net income after taxes — $4.5 million — came out positive for the first time.

The most recent quarterly report from September 2017 shows that its net income after tax was about $3.4 million.

But Sendero has faced the same challenges as insurers throughout the country after the Trump administration last fall eliminated cost-sharing reduction payments as part of the effort to unwind the Affordable Care Act, also known as Obamacare. The federal government had been paying those subsidies to insurers to reduce out-of-pocket costs for low-income people.

RELATED: Thousands in Central Texas may feel impact of Trump health care move

Without those payments, many insurers have had to raise premiums. An April 2017 analysis by the Kaiser Family Foundation found that Texas insurers previously receiving the subsidies would have to raise premiums by 19 percent on average to make up for the loss of the payments.

Wesley Durkalski, president and CEO of Sendero, said the HMO raised premiums for 2018 by 43 percent. Durkalski projects that the increase will generate more than $40 million in revenue.

Another reason for the shortfall, officials said, was a lower payout than expected from the Affordable Care Act’s risk-adjustment program. The program shuffles money from plans with healthier enrollees to plans with sicker ones.

Despite enrolling more members and providing more services, Sendero’s membership scored healthier on the whole, which meant they received less money from the risk pool.

Bell also said the difference in annual accounting periods — Sendero operates on a calendar year while Central Health operates on a fiscal year starting Oct. 1 — makes it difficult to predict precisely what costs will be, especially because providers can sometimes take months to file a claim.

Central Health President and CEO Mike Geeslin was optimistic this week about Sendero’s future. Geeslin said the Central Health board is constantly monitoring Sendero’s progress and financial health.

“The mission of Sendero lines up with that of Central Health in providing a community benefit for the low-income and uninsured of Travis County,” Geeslin said.