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    Minuteman Health shifting to for-profit status

    Minuteman Health Inc., an insurer launched with millions of taxpayer dollars, said Friday it is seeking to ditch its nonprofit structure next year and sell plans under a new for-profit entity.

    Executives of the Boston-based company said the change is necessary because the company faces regulations that are too burdensome. The company struggled to grow its membership and lost money after its launch in 2013.

    Minuteman was created under a program of the Affordable Care Act that was designed to offer lower-cost insurance options for individuals and small businesses. About two dozen such insurers were launched with $2.4 billion in federal funds — including $156 million for Minuteman. Many of the insurers struggled and shut down. One insurer in Maryland recently converted to a for-profit.


    Tom Policelli, Minuteman’s chief executive, said the company wants to do business as a for-profit because under current rules, it cannot grow its membership substantially beyond individuals and small businesses. Insurers such as Minuteman that sell plans in that market must comply with a controversial policy known as risk adjustment, which requires insurers with healthier members to make payments to insurers with sicker members. Minuteman has long complained that risk adjustment has hurt the company’s finances and ability to grow.

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    Executives said they will stop selling plans under their current corporate structure as of Jan. 1. Instead, they have formed a new company, Minuteman Insurance Co., to sell health plans in 2018.

    Minuteman has about 37,000 members; they are not expected to see any interruption in coverage this year.

    But the new for-profit company still needs approval to sell insurance in Massachusetts and New Hampshire. Executives have yet to raise enough capital to get approval from insurance regulators. They also must establish contracts with health care providers and design new health plans before a deadline of mid-August, regulators in both states said.

    “We know that they’re looking at forming a new company, which would be a private venture, and are in the process of getting sufficient funds in order to complete their application for licensure,” said New Hampshire Insurance Commissioner Roger Sevigny. “We are certainly hopeful they’re able to do that.”


    Chris Goetcheus, a spokesman for the Massachusetts Division of Insurance, said regulators in this state are also waiting to learn whether Minuteman has enough capital to launch a new company. “Right now, it’s wait and see,” he said.

    After stumbling in Massachusetts, Minuteman expanded to New Hampshire and now has the bulk of its members there. New Hampshire Republicans seized on the company’s announcement Friday as an example of the failure of the Affordable Care Act, or Obamacare.

    In Washington, Republicans in Congress have drafted legislation to undo much of that sweeping law, which they blame for imposing onerous mandates and driving up health care costs. The law expanded insurance coverage to millions of Americans.

    “Today’s announcement by Minuteman Health is more clear evidence that Obamacare has failed and that our nation’s health care system demands reform,” New Hampshire Governor Chris Sununu said. “It further underscores why Washington must act now to reform our health care system and take actions to stabilize our individual health insurance market.”

    Policelli said executives remain committed to selling affordable plans to individuals and businesses in New Hampshire and Massachusetts once they get approval to operate under the new company.


    “The old company Minuteman Health Inc. will be exiting the exchange. . . . Our intention is the new company will pick up right where that left off,” he said. “Our goal is that at the end of this process, nothing will change for people who want the Minuteman brand.”

    Minuteman executives did not say how much money they must raise to win approval for their new company. “We’re all very optimistic and confident about the path we’re on,” Policelli said.

    If Minuteman doesn’t gain approval to sell plans for Jan. 1, its members will have to select a plan from another insurance carrier to stay covered in 2018. Individuals buying insurance on the Massachusetts Health Connector have nine other insurers to choose from, while individuals in New Hampshire have a choice of three other insurers.

    Priyanka Dayal McCluskey can be reached at Follow her on Twitter @priyanka_dayal.