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PPACA plan liquidation petition highlights

By Allison Bell

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Nick Gerhart, the Iowa insurance commissioner, has posted a copy of the liquidation petition for CoOportunity Health on the Web.

CoOportunity is one of the new nonprofit, member-owned Consumer Operated and Oriented Plan (CO-OP) insurers created by the Patient Protection and Affordable Care Act (PPACA).

Gerhart put the CO-OP under supervision in December, warned about the possible effects of a plan liquidation around the same time, and last week announced his intent to file a petition for liquidation.

The petition was filed last week in a state court in Polk County, Iowa.

The current general individual coverage open enrollment period started Nov. 15 and is set to end Feb. 15. CoOportunity enrollees can enroll in new coverage through the open enrollment period by Feb. 15. They can also enroll through a special enrollment period that will last from March 1 through April 29. To avoid any gap in financial assistance, affected consumers need to enroll in a new QHP by Feb. 28, officials say in an announcement about the petition.

A look at the petition can also give outsiders a glimpse of what CoOportunity’s finances were like and how it was interacting with the PPACA “three R’s” risk-management programs — a temporary reinsurance program, a temporary risk corridors program and a permanent risk-adjustment program.

In 2011, federal officials estimated about 40 percent of the new PPACA CO-OPs they were helping to start would eventually fail.

To learn more about what’s in the petition, read on.

Dollar puzzle

1. CoOportunity’s obligations far exceed its liquid assets.

The company had only $13 million in cash on invested assets on Dec. 31, down from $28 million on Nov. 30.

The company has “liabilities including incurred but not reported claims (IBNR) of at least $150 million,” officials say in the petition.

Raining numbers

2. Iowa regulators think two of the three R’s program could come through.

The PPACA reinsurance program is supposed to use a broad assessment on insurance plan enrollees to help insurers cope with the cost of cover enrollees with very high claims, and the risk-adjustment program is supposed to use cash from plans with what appear to be unusually low-risk enrollees to help plans with unusually high-risk enrollees.

Those two programs owe CoOportunity about $75 million, but the money “will not be received until the second half of 2015,” officials say.

Some Republicans have described the third risk-management program, the risk corridors program, which is supposed to use money from insurers with solid underwriting margins and, possibly, government money to help insurers with weak underwriting results, as a bailout. 

On Dec. 13, Congress adopted the Consolidated and Further Continuing Appropriations Act of 2015. The act forbids HHS from using taxpayer money to fund the risk corridors program. The provision “placed in jeopardy the projected risk corridor asset” CoOportunity was hoping to get from the program, officials say.

See also: GAO: HHS needs congressional OK to make 2015 risk corridors payments

The change could cost CoOportunity about $81 million, officials say. 

Future tunnel

3. The case shows how administration of other CO-OP failures might work.

The U.S. Department of Health and Human Services (HHS) funded CoOportunity with PPACA CO-OP startup loan money and might like to recoup some of what it lent to the company.

In the Iowa petition, Gerhart is seeking court relief stating that “no lender, bank, savings and loan association, or other institution (including any state or federal governmental entity), person or other entity shall exercise any form of set-off, alleged set-off, lien, any form of self-help whatsoever or refuse to transfer any funds or assets to the liquidator’s or special deputy’s control without further order of this court.”

See also: PPACA: HHS Drafts CO-OP Regs