Thousands of Bay Area seniors left scrambling as financial woes strike Medicare Advantage plan

Oct. 11--A Southern California insurance company's financial woes are sending thousands of seniors in Santa Clara and San Joaquin counties scrambling for health care coverage amid the ongoing coronavirus pandemic.

More than 10,000 people in the two counties enrolled in Vitality Health Plan's Medicare Advantage option -- insurance that provides expanded Medicare coverage -- after it began serving the area in January 2019, attracted by good benefits and promises of inexpensive medication. But for many, the company's offerings turned out to be too good to be true.

"If my parents were on the plan, I would move them," said Patricia Salas, president of SBHIS Insurance Services, a company that enrolled elderly residents in Vitality's supplemental Medicare plan and is now hustling to help them find alternatives.

The main issue is Vitality's dire financial situation. The company is required to maintain what's called tangible net equity -- basically a few million dollars in financial reserves. Yet, as of this summer, according to the Department of Managed Health Care, the company had negative working capital and owed more than $15 million in unpaid provider claims and payments. That figure is now roughly $17 million, according to Vitality.

As a result, a number of local hospitals and surgery centers -- including Regional Medical Center, Good Samaritan Hospital, El Camino Hospital, O'Connor Medical Center, St. Louise Medical Center, Los Gatos Surgery Center, Bascom Surgery Center and Silicon Valley Surgery Center -- have terminated or announced plans to terminate their agreements with Vitality. That means plan members can't go to the facilities for non-emergency care unless the centers agree that there are extenuating circumstances, such as necessary post-op care.

While some who've dealt with the company blame it for overpromising what it could deliver, Vitality's president, Brian Barry, insists it is a victim of circumstance. With Medicare Advantage programs, he said, "the government pays the health plans based on the health diagnoses of its members, which must be first obtained by the physicians and eventually submitted to Medicare. In Vitality's case, we had an enormous amount of new members and we couldn't get a high enough percentage of those members to see their doctor to be diagnosed.

"Consequently, Medicare paid Vitality a lower amount each month for many members whose health diagnoses went underreported," Barry said. "The lower-than-expected revenue led to losses each month."

The state has issued a cease and desist order that prevents Vitality from enrolling new members and scheduled a hearing for late April 2021 that could ultimately end the company's license to operate. In the meantime, seniors on the plan are left trying to navigate a confusing, bureaucratic web -- fearful that they'll need to delay important medical procedures or switch doctors.

"There's anxiety in the senior community anyway because of COVID, and everything else that's happening," Salas said. "They just want someone to look them in the face and tell them things are going to be OK."

In September, members living in Santa Clara County received a letter from the company acknowledging that a number of hospitals had ended contracts with Vitality and announcing that they had a chance through November -- outside their regular enrollment period -- to switch plans.

Salas said her brokers sat with a number of seniors while they dialed the 1-800 number to change plans. She felt obligated, she said, to help people get out but got nothing in return. Her agency has taken a financial hit, she said, because when people unenroll, she gets charged back what's known as the override -- the fee the agency got for enrolling members. Because of the financial toll, Salas said, she's heard about other agents trying to keep members with Vitality despite the increasingly limited care options.

Barry, however, countered that "if the broker enrolls that member into a different health plan, the broker would most likely get paid a new commission from that new health plan."

Losing members also means even more lost revenue for Vitality.

"We're in a situation where we've got an insurance company having financial problems and because they're having financial problems, they're asking us to disrupt physician-patient relationships," said Peter Goll, CEO of the Physicians Medical Group of San Jose.

The group has seen thousands of patients flee Vitality and, even for those that remain, has been left wondering where to send people who need procedures or hospitalization.

"The fact that we don't know," Goll said, "and seniors don't know is not good."

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