Neighborhood Health Plan has stopped accepting new Medicaid members after losing $241 million since 2014, a troubling sign of how hard it is to serve low-income residents in a state with some of the highest health care costs in the country.
Neighborhood, a subsidiary of Partners HealthCare and the largest Medicaid insurer in Massachusetts, said it temporarily froze enrollment as part of a “corrective action plan” developed with state health officials.
The unusual move means low-income families who qualify for Medicaid — a joint federal-state program called MassHealth in Massachusetts — will have fewer insurance options. Neighborhood is the only MassHealth plan that provides its members access to the state’s most renowned teaching hospitals, Massachusetts General and Brigham and Women’s, which are also owned by Partners.
Neighborhood has more than 300,000 MassHealth members. That’s an increase of about 30 percent from just two years ago. Existing members will not be affected by the changes, Neighborhood said.
“Despite making progress in controlling total medical expenses, Neighborhood Health Plan continues to experience material losses in the MassHealth program,” spokeswoman Pam Jonah said in a statement. “We evaluated many options to address our financial challenges with the MassHealth program and determined that the temporary enrollment freeze would ensure the least disruption.”
Neighborhood is one of six insurers that the state pays to manage care for residents on MassHealth.
About 858,000 people are members of these plans, but many other MassHealth members access services directly without signing up for a health plan.
Those people still will have access to Partners and other hospitals.
Health care providers that serve MassHealth members, including Boston’s South End Community Health Center, were surprised to learn of the enrollment freeze, which took effect last week.
“It appears that economically, it’s untenable for many organizations to care for the poor, and this is a problem that we need to deal with as a Commonwealth,” said Bill Walczak, chief executive of the South End health center.
Neighborhood has suffered heavy financial losses in recent years, which company officials have attributed to issues with their MassHealth business: higher-than-expected drug and medical costs, spikes in membership, and low payments from the state. The insurer lost $110 million on operations in the fiscal year that ended Sept. 30, 2014, prompting Partners to consider selling it off, and $75 million in fiscal year 2015. In the nine-month period ending June 30, it lost $56 million more.
State health officials said Neighborhood pays hospitals “significantly higher” than the benchmark set in the contract between the health plan and the state
The temporary freeze in enrollment is meant to help Neighborhood correct the problem by giving it time to renegotiate the rates it pays hospitals. Neighborhood declined to name the hospitals with which it would seek renegotiations.
State officials said they will evaluate the plan’s progress in February to decide whether to continue the enrollment freeze.
The insurer already has taken some unpopular steps to control spending.
Earlier this year, Neighborhood made it more difficult for members to see specialists at Boston Children’s Hospital, a prestigious but high-priced hospital.
Neighborhood has traditionally been a plan primarily for MassHealth members, whose health costs are entirely covered by the state.
But the company, which was acquired by Partners in 2012, has been trying to boost its roster of premium-paying commercial members, a more profitable line of business. It even launched an ad campaign last year to shed its image as “cheap,” in an effort to attract employers and premium-paying customers.
The plan said it has about 152,000
Neighborhood is popular on the state’s Health Connector, the exchange where individuals can buy insurance. But it is raising rates for those individuals by an average of 21 percent next year, which could disrupt many members.
Neighborhood’s business is still predominantly in MassHealth. It has far more MassHealth members than any other health plan; the next biggest is Tufts Health Plan, which has about 219,000 members, and Boston Medical Center HealthNet Plan, with 188,000 members, according to state figures.
Neighborhood said its “30-year commitment to the MassHealth program remains strong.”