The idle construction site of Passport Health Plan’s proposed new headquarters at 18th Street and West Broadway. | Photo by Boris Ladwig

As Passport Health Plan’s future hangs in the balance, the nonprofit disclosed in a new report that it lost $122 million last year, or about twice as much as it previously projected.

In a financial statement Passport filed with the Kentucky Department of Insurance, Passport said that beyond an operational shortfall it had to take a $47.4 million charge because of projected shortfalls through June.

“At this time, management feels the revenue rates will not be sufficient to provide for estimated medical and administrative expenses,” Passport said in the report, “and thus a $47,415,290 premium deficiency reserve is required as of” Dec. 31, for the period through June 30.

Insurers have to list such a reserve on their financial statements when they expect that the dollars they are going to collect through insurance premiums will not be enough to cover claims and other expenses. Passport has said that it is projecting a loss of $144 million for this year — though that was before it announced drastic cuts on Friday.

Passport officials had previously said that the nonprofit’s 2018 loss would be near $65 million, but its financial report had not been available until now.

Passport told Insider via email Tuesday that the $65 million figure was “an estimate” and that it was required to record the premium deficiency reserve, “which accounts for the majority of the difference.”

Passport is one of five organizations in Kentucky that manage Medicaid benefits. Medicaid is a mostly federally funded health insurance program primarily for the poor, pregnant women and people with disabilities. The state last summer changed the way that it distributes the Medicaid dollars, which reduced payments to Passport. The nonprofit has sued the state to restore the previous disbursement rates.

Passport’s fiscal problems had prompted the nonprofit on Feb. 22 to halt work on its $87 million planned headquarters at 18th Street and West Broadway. The move dismayed community leaders, who had said that they hoped the project would stimulate the economy and inhibit further social degradation in an underserved part of the city. At a gathering on Monday, U.S. Rep. John Yarmuth, D-Ky., and others called for the state to help avert Passport’s impending insolvency.

Health care experts also have told Insider that they fear Passport’s insolvency could disrupt care for Medicaid beneficiaries and undermine their long-term health prospects.

Passport’s new report also shows that revenue last year, at nearly $1.95 billion, was up about $20 million, or 11 percent, compared to 2017, while the number of beneficiaries covered by the nonprofit increased 2 percent.

However, the revenue increase was more than offset by higher expenses. Hospital expenditures, at $822 million, rose by $68 million, or 9 percent. Administrative overhead rose by more than $11 million, to nearly $194 million. Since 2015, general administrative expenditures have risen by more than $86 million, or about 80 percent. As a share of revenue, administrative overhead was nearly 10 percent last year, up from 6.5 percent in 2015.

Passport’s prescription drug costs, at $359 million last year, rose by $35 million from 2017, or nearly 11 percent. The nonprofit told Insider that the increase reflects “the explosion of pharmaceutical drug costs — things like the opioid epidemic and specialty drugs — (that) are affecting every health plan across the country.”

While the disbursement changes at the state level have narrowed Passport’s revenue stream, an analysis by Insider, based on filings with the Internal Revenue Service and the Securities and Exchange Commission, indicated that the nonprofit’s fiscal health also was being undermined by hundreds of millions of dollars in management fees to the Arlington, Va.-based consulting company Evolent Health.

Both Passport and Evolent have declined Insider’s request for information about how their relationship is benefiting Passport and/or its beneficiaries.

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Boris Ladwig
Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.