sentara – C-VILLE Weekly

Remember back in 2017, when some here learned their health insurance premiums could jump to $3,000 a month and that Charlottesville’s rates were the highest in the country?

Those eye-popping premiums have drawn the attention of the U.S. Department of Justice, which is taking a look at how the rates for Optima Health Plan, owned by Sentara, which also owns Sentara Martha Jefferson Hospital, jumped an average 82 percent in Virginia and up to 266 percent in Charlottesville. The DOJ notified Sentara in May 2021 it was starting an investigation under the False Claims Act.

While the government hasn’t filed a lawsuit, more than two years later, an apparently exasperated DOJ filed a petition November 13 asking a judge to order Sentara executives to provide the documents and testimony it has requested as it investigates whether Sentara bilked the federal government out of $665 million in payments it made under the Affordable Care Act, according to the petition.

On November 22, U.S. District Judge Elizabeth Dillon ordered, at Sentara’s request, the petition to be temporarily sealed. And on November 27, she ordered Sentara into court December 19 to show cause why it hasn’t complied with the DOJ’s civil investigative demands.

For Sara Stovall and Ian Dixon, it comes as no surprise that Sentara is under investigation for making false statements in its 2018 and 2019 health insurance rate filings, and false claims under the Affordable Care Act. They were among the people who learned in 2017 that Optima, the only insurance covering the area, would charge nearly $3,000 a month to insure their families.

And the fact the DOJ had to file a petition to force Sentara execs to provide documents and testify to civil investigative demands, well, “That’s the Optima we know,” says Stovall. “That’s their M.O.”

Stovall and Dixon, along with Karl Quist, formed Charlottesville for Reasonable Health Insurance. They met with Sentara execs, the Virginia Bureau of Insurance, and an estimated 30 state and federal officials, seeking help for their premium predicament.

“When we first brought this to the Bureau of Insurance, we gave Optima the benefit of doubt that this was a mistake,” says Stovall. “They had every opportunity to correct it. With their topmost executives refusing to cooperate with the DOJ, that tells us everything. I can’t come up with another explanation but that this was an intentional overcharge.”

“Extraordinary” is how Martin Bienstock, an attorney who specializes in insurance litigation and the False Claims Act, describes the DOJ’s petition, which says Sentara withheld 1,900 documents. “Usually a defendant would want to avoid the appearance that they’ve got something to hide.”

Also striking to Bienstock is that as a not-for-profit corporation, “You would think they’d be operating on behalf of the public and eager to make sure they haven’t engaged in fraud or wrongdoing under the False Claims Act.” He finds it notable that Sentara has hired not one, but two large law firms. “That seems like a lot of out-of-pocket costs for a not-for-profit,” he adds.

Sentara continues to insist its premiums were reasonable and that it has cooperated with the DOJ. “The rates offered by Optima Health Plans in 2018, after Anthem and other carriers exited from the Charlottesville exchange and the Commonwealth requested Optima remain in the market, were reviewed and approved by third party actuarial experts, the Virginia Bureau of Insurance, and the Centers for Medicaid and Medicare Services in accordance with state and federal laws,” says Sentara spokesperson Mike Kafka in an emailed statement.

“We have been transparent and cooperative with DOJ throughout this more than two-year process,” he adds. “The current petition, filed on November 13, seeks answers to questions and information we responded to and provided previously.”

In the course of the investigation, Sentara turned up nearly 7,000 pages that were not previously disclosed. “It strikes me as a pretty egregious failure to identify documents,” says Bienstock.

DOJ officials discovered that not all relevant documents had been turned over during a meeting with Sentara, when some showed up in a PowerPoint presentation. ”Sloppy,” says Dixon.

Tim Jost, an expert on health law and the Affordable Care Act, and professor emeritus at Washington and Lee, explains that cases under the False Claims Act can be filed by the Department of Justice or a whistleblower. If the latter, the case is sealed and if the government recoups its losses, the whistleblower gets a share.

Health care fraud can be criminal, he says, but it appears the DOJ is investigating Sentara under the civil False Claims Act.

“There are many False Claims Act cases in the health care areas,” says Jost, usually with drug companies, hospitals, or physicians. “But this is the first time I’ve seen one with respect to the Affordable Care Act.”

It’s common for defendants to object to government requests for information as being overly burdensome, says Jost. But the undisclosed documents turning up in a PowerPoint? “I think that’s kind of awkward. It looks like the DOJ is kind of irritated that they’re being strung along.”

Stovall is happy that a government agency is finally looking into what her group has been saying for years. “To me, it really speaks to their arrogance that we wouldn’t be savvy enough to know how insurance works and that regulators would look away.”

Most surprising for Stovall is the $665 million Sentara collected from the government “to cover these apparently fraudulent subsidies.”

“If anything shocked me in the past six years,” says Dixon, “it’s the arrogance of thinking you can triple rates and think no one is going to look in and ask questions and that you can get away with it.”

Dixon notes that Sentara made a big deal about its not-for-profit status, and points out that recently retired CEO Howard Kern, who is named in the DOJ petition multiple times for refusing to provide documents, made $33 million, according to Sentara’s 2021 IRS 990 filing, which also lists nearly $5 billion in assets at the end of that year.

Its current CEO, Dennis Matheis, was president of Optima in 2018. Now the Optima name is vanishing in a multi-million dollar rebranding to Sentara Health Plans. Speculates Stovall, “That suggests something you might do if investigated by the DOJ.”

Even if the government reclaims the $665 million it alleges it’s out, that’s not going to make whole the people who are still out the premiums they paid to Sentara, says Dixon. “Some people really got harmed.”

Emily Bardeen is one of those people. She says she got “a paltry check from the insurance company that was supposed to make up for the outrageous rates but was a drop in the bucket.”

She had just retired when Optima became the sole insurance option in Charlottesville, and she and her husband made $200 too much in income to qualify for Affordable Care Act subsidies, she told C-VILLE in 2018. They ended up paying $30,000 a year in health insurance premiums, more than their mortgage, she said.

“What I couldn’t get over was that the State Corporation Commission [which oversees the Bureau of Insurance] approved the rates,” she says. “They somehow agreed this was reasonable. That was what was so shocking to me.”

She believes Optima took advantage of its monopoly in Charlottesville. “It was a terrible example of price gouging, and approved by the state,” she says. “Shameful.”

Morbidity rates: Optima’s health insurance premium calculations challenged

In November, Sara Stovall was grappling with a health insurance premium that had skyrocketed from $940 a month to $3,000 for her family of four in the Charlottesville market, which found itself with the highest rates in the country.

Now Stovall says she has a better idea of why this area’s rates are so high. She believes Optima Health—the area’s only individual policy provider—used a factor in calculating health insurance premiums that the U.S. Department of Health and Human Services forbids—and she says its incoming CEO admitted as much in a December 14 meeting.

Stovall and fellow Charlottesville resident Ian Dixon met with Optima CEO Michael Dudley and his successor, Dennis Mathias. It was there that in explaining why Charlottesville’s rates are so high, according to Stovall and Dixon, Mathias said, “The morbidity of the people buying in this marketplace is higher than other parts of the state.”

The two say Dudley further explained that morbidity is “how sick people are.”

And that’s a big no-no in HHS’ 2018 Unified Rate Review Instructions: “Geographic factors may not reflect differences in morbidity by region.”

To Dixon and Stovall, inclusion of morbidity as a factor would explain why a Charlottesvillian would pay 68 percent more for a bronze health plan than someone in the Hampton Roads area.

They point out that Optima’s filings use an area rating factor for Charlottesville that’s 58 percent higher than Hampton Roads—but they say Anthem’s area rating for Charlottesville was lower than Hampton Roads. “There’s no history of our area being rated this high,” says Dixon.

Another factor they question is the difference between Optima’s individual policy rates and the small group rates it offers businesses. In Charlottesville, the small group rate is significantly lower than an individual plan, despite both using the same providers and the same provider reimbursement rates, says Dixon.

“We don’t see any justification for the 58 percent difference from small group and individual rates,” says Stovall.

“They said small groups are healthier,” says Dixon. “The health of the population and morbidity cannot be used in setting the rates.”

In a statement from Optima’s Dudley, he does not address the question of whether morbidity was used in how the company calculated its Charlottesville premiums.

“We have carefully revisited our 2018 premium calculations,” and determined the calculations were accurate, reviewed by third-party actuarial experts and approved by the Virginia Bureau of Insurance and the Centers for Medicaid and Medicare Services, he says.

Optima did not respond to a question about the statements allegedly made by Dudley and Mathias on morbidity, but says, “This is a very complex issue, and we correctly addressed all appropriate adjustments in accordance with state and federal laws, and, as required by the regulations, the geographic factors did not reflect differences in morbidity by region.

Stovall and Dixon met with people from Virginia’s Bureau of Insurance, and say that while those in the meeting initially were skeptical about their concerns, “by the end of the meeting they felt our concerns were valid,” says Stovall.

“You’ll have to rely on what they’re telling you as far as the meeting goes,” says Ken Schrad, spokesperson for the State Corporation Commission, under which the Bureau of Insurance resides.

“The bureau can always seek further information to be responsive to an inquiry or complaint from an already accepted filing,” he says.

Would Optima’s request for premium rates that are the highest in the country raise any red flags at the Bureau of Insurance? Says Schrad, “There’s so many factors that go into filing for insurance plans. To point out one factor alone as driving something would be hard to do.”

Optima maintains that when Anthem pulled out of the Charlottesville market, leaving zero insurance providers, despite business advisors telling the insurer to steer clear, it was asked by the commonwealth to come in and cover as many people as it could.

Optima Health is owned by Sentara, which also owns Sentara Martha Jefferson Hospital here. Optima did not respond to a question about whether that also was a factor in its decision to offer coverage here.

The company did say it had lost more than $30 million in the past three years in Virginia under the Affordable Care Act and this “is not sustainable.”

And Dudley’s response to Stovall and Dixon suggests they move on. “The reality is that premium rates are locked in for 2018,” he says. He adds the wish that “Washington would establish an environment that allows for affordable health plans.”

While Dixon considers the response “evasive” in not addressing “the crux of our complaint about morbidity,” he and Stovall are with Dudley on one point. They plan to escalate with the Bureau of Insurance and go back to their senators and congressman to figure out why Charlottesville can’t get affordable care.

Updated December 27 with Optima’s denial that morbidity was used to calculate Charlottesville’s health insurance premiums.