New York health co-op ordered to close down
By Amy Goldstein
September 25 - The Washington Post
The nationfs biggest nonprofit health insurer spawned by the Affordable Care
Act has been ordered to shut down as it reels toward insolvency, disrupting
coverage for more than 200,000 New York state residents and becoming the fourth
such co-op to collapse in recent months.
The action Friday to force Health Republic Insurance of New York out of
business was a coordinated maneuver by state regulators and by federal health
officials, who have been trying to nurture fledgling co-ops while dealing with
the reality that most are hemorrhaging red ink.
Their move is the latest — and, so far, the largest — blow to an aspect of
the 2010 health-care law that was intended to foster a new breed of health
coverage. These Consumer Oriented and Operated Plans (CO-OP) were envisioned as
an alternative to the traditional insurance companies that dominate the nationfs
health coverage landscape.
Many of the 23 co-ops that opened for business nearly two years ago have
struggled for a toehold. But New Yorkfs quickly became popular, attracting more
than 150,000 members in its first year and, by this summer, about 210,000
members, who bought coverage on their own or through small businesses.
Among 16 insurers selling individual health plans in New Yorkfs ACA insurance
exchange, it became the second most popular, enrolling about 75,000 people
through the marketplace.
Even as it ran consistent financial losses — about $53 million midway through
this year — many insurance industry and health policy experts believed that
Health Republic was too big for the government to let it fail.
Instead, in synchronized moves Friday, the Department of Health and Human
Services canceled an agreement that has funneled $265 million in start-up loans
to Health Republic, and New York health officials blocked it from selling
policies on that statefs exchange. State insurance regulators ordered it to stop
accepting new members immediately.
gWhile we are deeply disappointed with this outcome, we believe it is in the
best interests of our members,h Health Republic spokesman Michael Fagan said in
a statement. He and federal health officials emphasized that, by beginning the
shutdown now, theyfre giving members ample opportunity to switch to a different
plan during the three-month ACA open-enrollment season that begins nationwide on
Nov. 1.
The co-opfs individual health plans will end in December. The ending time for
small-business health plans will vary.
Health Republic becomes the fourth co-op to founder in less than a year. Just
last month, a co-op in Nevada said it would close at the end of the year.
Louisianafs co-op also is shutting down then, and a co-op that sold health plans
in Iowa and Nebraska went out of business last winter.
gWe are not going to rule out that there may be others this year,h said a
federal health official, speaking on the condition of anonymity to discuss
internal information. gThis is a tough, tough, tough business.h
Because each co-op exists in a different state and different health insurance
climate, Health Republicfs collapse is not a harbinger for all the rest, said
Peter Beilenson, chief executive of Evergreen Health Cooperative in Maryland.
Still, he said, git clearly is not good for the [co-op] program, because it is
the biggest one, and itfs obviously going to get a lot of attention.h
Beilenson said that Health Republicfs failure shows that federal health
officials should make it easier for the co-ops to raise outside capital, which
some need if theyfre going to last long enough for them to become financially
stable.
The federal health official said that in July, HHS administrators gidentified
issues that we kind of felt threatened the companyfs financial solvency.h
Administrators in the departmentfs Centers for Medicare and Medicaid Services,
which oversee many aspects of the ACA, reviewed Health Republicfs financial
filings and conferred with state regulators and co-op leaders.
Ultimately, they concluded that gthere was a fairly high likelihood the
company would become financially insolvent.h
Fagan said that state insurance regulators already had approved the rates
that the co-op could charge for its 2016 plans. But before Friday, New York
State of Health, the exchange created under the federal health-care law, had not
yet decided whether Health Republic could continue to participate in the
marketplace for the coming year, and so the insurer had not begun promotions for
the coming open-enrollment season.
In explaining what went wrong, Health Republic referred to decisions, by
Congress and the Obama administration, that cut by more than half the amount of
federal money the ACA originally would have provided the co-ops to help them get
started and compete against larger, more-established insurance companies.
gStarting a new insurance company is a daunting task in any environment,h
Fagan said, gbut the challenges placed on us by the structure of the CO-OP
program as enacted by a bitterly partisan Congress were simply too difficult to
overcome.h