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Regulators order New York CO-OP to shut down

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State and federal regulators have ordered Health Republic Insurance of New York to stop writing new health insurance policies. 

The New York State Department of Financial Services, the New York State of Health public exchange program and the Centers for Medicare & Medicaid Services (CMS) said in a joint announcement that Health Republic, a nonprofit, member-owned insurer, will “commence an orderly wind down after the expiration of its existing policies.”

Existing individual policies will stay in effect until the end of the year.

The status of Health Republic’s small-group plans will depend on “Health Republic’s ongoing financial results,” CMS and New York officials said in the announcement.

“Any future determinations made on small group plans will be announced with appropriate notice to help provide a transition period to new coverage and protect policyholders,” CMS and New York officials said.

Kevin Counihan, head of the public exchange program at CMS, said in a statement included in the announcement that CMS agreed with New York regulators that it was in the best interest of Health Republic policyholders for the company to wind down its operations “because of the likelihood that Health Republic Insurance of New York would become financially insolvent.”

Health care providers “are required under the terms of their contracts to continue delivering care to Health Republic customers,” CMS and New York officials said.

Officials did not say whether provider reimbursement levels or other terms might change as a result of the decision to have Health Republic wind down its operations. The shutdown announcement included no mention of agents or brokers.

Health Republic said in a statement of its own that it will continue to process all enrollee medical claims through the end of the year.

“While we are deeply disappointed with this outcome, we believe it is in the best interests of our members,” the CO-OP said. “As a nonprofit CO-OP, our members and their families are at the heart of every decision that we make.”

New York state health care access activists started Health Republic of New York in 2014, using startup loan money from the Patient Protection and Affordable Care Act (PPACA) Consumer Operated and Oriented Plan (CO-OP) program.

The CO-OP used low premiums to get consumers’ attention.

See also: Low-cost CO-OPs win share

Analysts at the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) reported earlier this year that the New York CO-OP did better than any other PPACA CO-OP at selling policies during the 2014 open enrollment period.

The CO-OP predicted it would have about 31,000 enrollees. It ended up with about 155,000 enrollees. For 2015, enrollment increased to $215,000.

See also: Watchdog: CMS is giving 4 CO-OPs’ finances extra attention

Exchange officials say the CO-OP is now covering about 20 percent of the 415,000 people who have individual qualified health plan (QHP) coverage through the New York state exchange, and 37 percent of the 14,600 people who have coverage through the exchange program’s Small Business Health Options Program (SHOP) division.

PPACA CO-OP rules make it difficult for CO-OPs to raise capital from traditional private lenders or investors, because CO-OPs are forbidden from ever having a relationship with either a for-profit or nonprofit health insurer, or from selling their operations to another entity.

The company reported a net loss of $35 million for 2014 on $529 million in revenue, and the slow start of three PPACA risk-management programs that are eventually supposed to send cash to insurers may have also affected the company’s operations.

In the past, CO-OP supporters might have been able to get a CO-OP relief bill through Congress, but disagreements between Republicans and Democrats over the future of PPACA have made persuading Congress to adjust PPACA difficult.

Health Republic alluded to the obstacles in Washington in its statement.

“Starting a new insurance company is a daunting task in any environment, but 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,” the company said.

Health Republic is the third CO-OP that has announced plans to shut down at the end of the year.

The CO-OPs in Louisiana and Nevada previously announced plans to shut down.

See also: Louisiana puts CO-OP in rehabilitation

A fourth CO-OP, CoOportunity, shut down in late 2014. CoOportunity covered about 100,000 residents of Iowa and Nebraska.

Kelly Crowe, chief executive officer of the National Alliance of State Health CO-OPs (NASHCO), the trade group for CO-OPs, said in a statement that the CO-OP program rules have made raising capital difficult, and that it now looks as if two of the PPACA risk-management programs, the PPACA risk corridors program and the PPACA-risk-adjustment program, will hurt some CO-OPs rather than helping them.

“NASHCO will continue to work with our members, regulators, and other stakeholders to help create an environment in which CO-OPs can more easily achieve long term success,” Crowe said.


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