Utah shuts down Arches, the statefs nonprofit insurance co-op
By Kristen Moulton - The Salt Lake Tribune
Published: October 28, 2015 10:00AM
Updated: October 28, 2015 12:49PM
Arches Health Plan, a membership cooperative that was
born out of the Affordable Care Act and insures 66,000 Utahns, has been ordered
out of the insurance market for 2016.
Arches insures more low-income Utahns on the federal
exchange, healthcare.gov, than any other company besides SelectHealth. But it
also has customers who get their insurance on their jobs and individuals who buy
plans through insurance agents or brokers.
Those 35,000 people who bought Arches plans via the
exchange or from insurance brokers or agents will now have to find new health
insurance for 2016. The co-op also has to stop writing new policies for
businesses immediately, Utah Insurance Commissioner Todd Kiser said. Arches
insures 31,000 people through employer-sponsored plans, a spokeswoman said.
The Utah Insurance Department put Arches in receivership
Tuesday afternoon, an emergency action because of the looming open enrollment
period for 2016 health plans for those who donft get their insurance through
their jobs. Open enrollment begins Monday. Receivership means the insurance
department will oversee Archesf termination of insurance plans.
The Centers for Medicare and Medicaid Services (CMS)
demanded a decision by Tuesday afternoon, Kiser said, culminating a week of
scrambling by Arches to find a solution to a cash flow problem created, in part,
by a change in federal policy.
In the end, Arches was not able to raise the cash needed
to assure regulators that it would be solvent enough to handle claims through
2016. The co-op has enough money to ensure existing policyholders have a gsoft
landing,h with all claims paid, Kiser said.
The nonprofit co-opfs failure has big implications for
rural Utah.
In 20 counties, Archesf departure leaves consumers with
just one insurer offering plans on the exchange for 2016: SelectHealth, owned by
Intermountain Healthcare. The exchange is the only place people with low incomes
can buy subsidized healthcare.
Residents of the 20 counties — mostly rural, but also
residents of St. George and Logan — might be faced with a dilemma, Kiser
said.
If his agency cannot persuade other insurers to offer
plans on the exchange, those consumers might have to pick a subsidized
SelectHealth plan that does not have in-network providers in the same county.
Or, they might forgo subsidies so they can have in-network providers in their
home counties. Rural Utahns could be pinched either way, he noted.
Kiser said he has preliminary approval from the feds to
ask other insurers to step in to the exchange, although several already dropped
out for 2016. gMiracles could happen,h he said. gIfm praying and hoping we can
find somebody ... to help with that need.h
Utahfs is the 10th state co-op to fail in the individual
market this fall; a Health and Human Services report this summer said 22 of the
23 were losing money.
The insurance department had approved rate increases
averaging 43 percent for Archesf 2016 individual plans.
Tricia Schumann, chief communications officer for the
Salt Lake City-based co-op, said the CMS the Utah Insurance Department on Oct.
20 that it was concerned about Archesf financial viability.
The CMS on Oct. 1 notified insurers that it would be able
to cover 12.6 percent of their losses through its risk corridor program. Thatfs
because Congress, after Obamacare began, put new restrictions on the program
that was designed to cushion insurersf losses by reallocating funds between them
for the first few years.
The consequence to Arches was huge: The company is not
getting $8.7 million from the feds that it had expected this fall.
gFor any company, that degree of cash adjustment is very
challenging,h Schumann said. gWe think everyonefs back is against the wall on
this. We really donft fault anyone, but itfs a tough political climate.h
The co-ops came into existence with the Affordable Care
Act and were intended to offer more competitive plans for low-income health care
shoppers. They generally lack the deep pockets of other insurance companies, and
because they are member-owned, they canft raise capital by selling stock.
Itfs hard for co-ops to borrow money because the federal
government is first in line to get repaid. Arches has $90 million in loans from
the feds, Schumann said.
Utah Sen. Orrin Hatch called Arches failure ga direct
consequence of Obamacarefs inability to put Utah patients first.
gBecause of Obamacarefs broken promises, patients in Utah
will be forced out of their health plans and federal taxpayers will be left
footing the bill for this botched experiment,h he said in a news release.
Archesf shuttering underscores the need to repeal the Affordable Care Act, the
release said.