Profited from high-risk insurance plans

New Mexico governor candidate profited from high-risk insurance plans

Rep. Michelle Lujan Grisham earned hundreds of thousands of dollars from the firm managing a health program that critics say should have been closed after Obamacare.

By RACHANA PRADHAN

Rep. Michelle Lujan Grisham, the leading Democratic candidate for governor in New Mexico, profited from the state’s use of a high-priced health-insurance program for seriously ill patients, even after Obamacare made such programs virtually obsolete.

As most states were shuttering their subsidized health-insurance programs for people with pre-existing conditions because they could get coverage through Obamacare, a firm co-founded by Lujan Grisham and a close political ally received millions of dollars to run New Mexico’s program, even as she served in Congress.

The state’s high risk pool is still open even though its premiums are higher on average than Obamacare — 10 percent higher this year — and while all but nine of the 35 states that once had such programs either shut them down or cut off new enrollment. It also continued despite efforts by New Mexico Republicans to curtail the program.

Lujan Grisham, who is facing two rivals for the Democratic gubernatorial nomination in next Tuesday’s primary, founded the Delta Consulting Group along with Debbie Armstrong, a longtime political ally and the treasurer of her gubernatorial campaign, in 2008, as both were leaving Cabinet positions under former Gov. Bill Richardson.

In 2009, the firm received the state contract to run the high-risk pool under a competitive-bid process. Between 2014, when Obamacare took effect, and 2017, Delta Consulting Group was paid more than $2 million to run the program, according to contracts POLITICO obtained through a public records request. Its annual payments increased to more than $600,000, even as enrollment dropped.

The 58-year-old Lujan Grisham — scion of one of the state’s leading political families, which includes her uncle, former Interior Secretary Manuel Lujan, and her cousin, Rep. Ben Ray Luján — sold her 50 percent stake in the company last June, six months after she announced she would run to succeed outgoing Republican Gov. Susana Martinez. Her congressional financial disclosure forms show she earned a total of between $165,000 and $350,000 in dividends from Delta from 2013 to 2016.

Lujan Grisham and Armstrong each deny that they have ever exerted pressure on state officials to keep the program open because of their financial interests, although good government experts suggest that influence would be difficult to detect, in part because of New Mexico’s porous conflict of interest rules.

“Absolutely not,” Lujan Grisham, who was elected to Congress in 2012, told POLITICO. “Those are decisions that have to be made by the [high-risk pool] board, based on who they’re serving.”

Armstrong, who was elected to the New Mexico Legislature in 2014 and briefly worked on Lujan Grisham’s congressional staff, is also the high-risk pool’s executive director. Last year, she was named chairwoman of the Health and Human Services Committee of the New Mexico House, where a Martinez administration-backed bill that would have limited high-risk pool enrollment and saved the state budget up to $43 million a year stalled, after the committee voted to table it.

Armstrong said she didn’t participate in the vote or discussions about the bill, though she did not formally recuse herself. In New Mexico, recusal rules say House members are required to vote on all legislation unless excused by a majority vote. But lax enforcement and vague wording mean the rules are open to broad interpretation, and formal recusals are rarely taken, according to legislators in the two major parties and ethics experts.

Nonetheless, critics say they are puzzled over why the Legislature continues to maintain a costly high-risk pool that was designed to address a problem — the inability of people with pre-existing conditions to get insurance — that Obamacare solved. The pool is costly to New Mexico taxpayers because, while it is funded through a tax on private insurers, those same companies then get a credit on their state taxes. Obamacare, by contrast, is federally subsidized.

Dan Foley, a Republican and former minority whip of the New Mexico House, said extending the high-risk pool is, among other problems, unfair to those patients — a “travesty,” he said — because it charges them more than Obamacare for essentially the same coverage.

“I would consider that fraud,” Foley said. “The high-risk pool was set up to cover people back in the day when we could disqualify someone for health insurance because of a pre-existing condition. That’s the only reason why it was there.”

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Democrats nationally maintain that Obamacare provided better, cheaper options for seriously ill patients than high-risk pools, which most states created long before the 2010 law was enacted to provide a lifeline to people who couldn’t get coverage anywhere else.

After 2014, when Obamacare took effect, 23 states closed their high-risk pools entirely, with many Democrats touting the change as one of the benefits of the Affordable Care Act. Paradoxically, New Mexico’s Democrats have been some of the staunchest defenders of maintaining their state’s high-risk pool. Lujan Grisham and Armstrong are among them. They argue that the high-risk pool gives some patients with diseases like advanced cancer more options, including making it easier to keep their own doctor.

“If you have cancer and you are looking for an immediate access or continuity of care with your current oncologist and the market shifts and they’re out of network, what would you do? And if it was your child and your pediatric oncologist who is in Denver and is out of network, would you want the pool or would you give that up?” Lujan Grisham said. “Those are tough issues and the [high-risk pool] board sets those policies.”

Lujan Grisham has deep roots in health care, having led New Mexico’s Agency on Aging and later serving as secretary of the Department of Health under Richardson. Health care struggles have also had a deeply personal impact on the New Mexico Democrat. Her sister died of a brain tumor at age 21 after exhausting the lifetime caps on her insurance. Her parents spent decades trying to pay off the ensuing medical debt, she said in a 2013 POLITICO profile.

Her defense of the high-risk pool, however, runs counter to the experiences of many other states. New Mexico is one of just nine states still taking new customers into its high-risk pool. It has no enrollment caps and people eligible for Obamacare can still sign up. That’s not the case in every state that still runs a high risk pool; for example, Nebraska, Washington and Wyoming have modified their pools so that they are open only to certain categories of people who qualify for Medicare but need additional coverage. California, with its population of nearly 40 million people, capped enrollment in its pool at 7,500 people.

In New Mexico, which has 2.1 million people, enrollment in the high-risk pool has fallen considerably from its peak of about 8,500 in 2013 — just before the Obamacare market opened — to around 2,400 today, according to John Franchini, the top insurance regulator in New Mexico and the pool’s board chairman.

Still, that number almost certainly includes many people who would otherwise qualify for coverage through New Mexico’s Obamacare insurance exchange, according to Armstrong and multiple people familiar with its operations. Some of the other recipients — about 1,000, Armstrong estimates — may not have other options, because they are either undocumented or on Medicare, for instance.

Proponents of the reform measure that got bottled up in Armstrong’s committee last year say the high-risk pool should exist, if at all, only for those who have no other options. Their bill would have prevented anyone who qualified for Obamacare from going into the high-risk pool, thereby saving the state and the customer money.

“There’s people in there that shouldn’t be in there,” said Steven Neville, a Republican state senator who sponsored that bill last year.

Even as enrollment declined after Obamacare, Delta’s compensation for managing the high-risk pool went up. In 2014, when Obamacare made other coverage options available, the firm was paid more than $425,000 in base fees to run the pool before accounting for additional incentives; the amount increased to $455,950 the following year and to $557,828 in 2016. In 2017, the company received roughly $674,000, based on its monthly fee rate.

Armstrong said the increases ly arose largely from specific managerial challenges, most of which were unaffected by the declining enrollment; there are fixed costs even with fewer customers, she said. On occasion, fees were increased mid-year when Delta took on additional duties.

Running the high-risk pool is a major part of Delta’s work; its other consulting clients include Emerge New Mexico, a nonprofit that trains Democratic women to run for office; the New Mexico Association of Nurse Anesthetists; and the New Mexico Association for Home & Hospice Care.

Armstrong said that the high-risk pool keeps its rates 10 percent higher than average premiums on New Mexico’s Obamacare exchange so as not to create an incentive for people to maintain their coverage when there are other coverage options available.

Armstrong also argued that keeping some of the sickest people out of Obamacare actually helped stabilize the new markets created by the federal health law. At one point officials were aggressively trying to shift people onto Obamacare coverage if they qualified, she said, but that push has stopped out of fear that it could “crater” the state’s health insurance exchange by loading too many high-cost patients into the state’s relatively small individual insurance market.

“We were really focused on protecting the people that we were serving and in the process not destroying the market for everyone else,” she said.

Roughly 49,800 people selected Obamacare plans this year on the exchange in New Mexico, which has one of the highest poverty rates in the nation. Colin Baillio of Health Action New Mexico, an advocacy organization, agreed that forcing too many high-risk enrollees into the market could destabilize it – particularly as the repeal of the individual mandate penalty and other policies pushed by the Trump administration could further weaken the Obamacare market.

“That could really throw the market into chaos,” he said.

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To Lujan Grisham’s opponents in the Democratic primary for governor, the key question isn’t whether the high-risk pool should exist, but whether her political clout played a role in keeping it going and thereby prevented customers from obtaining less expensive coverage.

“I think they [Lujan Grisham and Armstrong] have a very invested interest in keeping the high risk pool open,” said businessman Jeff Apodaca, one of two Democrats challenging Lujan Grisham for the gubernatorial nomination. “They’re making millions of dollars off of it — why wouldn’t they want to keep it open?”

Apodaca, a former media executive and son of a former governor, said he feels there’s no question that Delta has maintained contracts to operate the high-risk pool because of the pair’s outsized political power in New Mexico.

“It just seems pretty inappropriate and a smoking gun to me,” he said. “They’re all in cahoots together.”

The Martinez administration’s attempt to push changes last year, including barring individuals who qualified for Obamacare, would have saved the state money — up to $43 million each year in 2018 and 2019, state estimates show.

The bills stalled in committee — including at the New Mexico House Health and Human Services Committee, of which Armstrong became chair last year. Legislators voted to table it, and it has not been taken up since.

Armstrong, who maintains that she has “tried to go overboard” in disclosing her business relationship with the program and does not lobby for the pool in the state Legislature, says she intentionally did not listen to the discussion or participate in the vote. But bill supporters argue that political influence undoubtedly has played a role.

“It didn’t go anywhere because the chairman of the health committee in the House is the one that runs the pool,” said Rep. Paul Bandy, a Republican who sponsored the bill. “A lot of things like that in New Mexico happen — what could be perceived as kind of an inside deal.”

Much of the enforcement of New Mexico’s conflict of interest and vote recusal rules revolves around voluntary compliance and having other legislators police one another, said Viki Harrison with Common Cause New Mexico, which advocates stricter ethics laws. New Mexico legislators are not paid a salary and serve only part-time.

“When you police yourselves, there’s always going to be questions around transparency and cronyism,” she said.

The state has a ballot initiative this year to establish an independent ethics commission, which many states already have.

Lujan Grisham, for her part, said she cleared her co-ownership of Delta with the House Ethics Committee during her first year in Congress.

As a strong supporter of expanded health coverage, she said, her support for maintaining New Mexico’s high-risk pool isn’t at odds with one of the underlying goals of Obamacare — insuring the healthy and the sick through a larger program so that costs are spread out among a broader group of people.

“Each state, given the health status of their individuals ... has to set their own policy about how that works,” she said.