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Distributions of surplus funds from Passport Health Plan would have to go back to the state - not to the health care providers that comprise Passport - under a bill filed Friday by Sen. Tim Shaughnessy.
"This entity (Passport) was established as a not-for-profit. All of its members are not-for-profit. So it needs to operate from that perspective," Shaughnessy, D-Louisville, said in an interview. "So if it builds reserves larger than what it needs, the reserves would be directed back to the person paying the bills."
Passport - a consortium of hospitals, doctors and other health care providers - was created in 1997 to apply the efficiencies of managed care to limit the soaring costs of the state Medicaid program in a region that includes Jefferson and 15 surrounding counties.
Passport is paid under a $740 million annual contract with the state Medicaid program.
But last week Shaughnessy questioned distributions of surplus funds from Passport to its member providers - including the University of Louisville Medical Center and a U of L physicians group.
Records of the Kentucky Department of Insurance show that in late 2008 Passport distributed $10.5 million in reserve funds to these member-providers as a repayment of the initial capital they put up to start Passport.
Shaughnessy's Senate Bill 161 would still allow such reimbursement of initial capital.
The bill is aimed at two other $10 million distributions made by Passport - one in late 2008, the other in late 2009. Insurance Department records say they were made to Passport's member-partners as grants for indigent care.
Shaughnessy said his bill would require that any distributions of surplus from Passport, or any similar group that may be created in the future, be requested by the state Cabinet for Health and Family Services.
If the Department of Insurance confirms that the move would not damage the solvency of Passport, then the money would be transferred back to the state Medicaid program.
Shannon Turner, executive vice president of Passport, said the bill "seems very counterintuitive to how an insurance company operates."
"If there were a pandemic of some sort and the cost to deal with it exceeded what we were paid by the state, we would lose money," Turner said. "So to have any money we gain through our efficiency and operating successes returned to the state takes us out of the role of being treated like an insurer."
Tom Loftus
Source: The Courier-Journal February 2010
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