Another nonprofit, member-owned health carrier says it will close its doors at the end of the year.
Managers of Community Health Alliance Mutual Insurance Company, a Tennessee carrier founded with $73 million in loans from the federal Consumer Operated and Oriented Plans (CO-OP) program, have received state permission to put the company in a runoff process.
The insurer will continue to pay claims filed by holders of in-force policies, but it will stop taking on new customers, and it will shut down after Dec. 31, managers say. Community Health’s contracts with providers “should remain in force during the runoff,” and the insurer will pay providers for claims incurred through Dec. 31, managers say.
Community Health now has about 27,000 enrollees, up from 2,287 when compared to the end of 2014. It reported a $22 million net loss for 2014 on $6.6 million in premium revenue.
Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the CO-OP program in an effort to increase the level of competition in the health insurance market. The CO-OP provision and U.S. Department of Health and Human Services (HHS) regulations put tight restrictions on CO-OPs. Under current rules, for example, the member owners of a CO-OP can never sell the CO-OP. That restriction has hurt CO-OP’s ability to get cash from conventional investors.
Community Health was hoping to get $17 million from the PPACA risk corridors program, a program that’s supposed to use cash from PPACA exchange plan issuers that do well in 2014, 2015 and 2016 to help exchange plan issuers that do poorly in those years.
Officials at a division of HHS recently announced that they believe they will get less than 12.6 percent of the cash from exchange plan issuers that did well in 2014 of the amount that they need to pay in full, owed to issuers that did poorly.
The announcement about the risk corridors program funding shortfall made Community Health’s decision to shut down unavoidable, according to Jerry Burgess, the insurer’s president.
Julie McPeak, commissioner of the Tennessee Department of Commerce & Insurance, said the department decided to let Community Health enter a state-approved runoff process after lengthy discussions with the Centers for Medicare & Medicaid Services (CMS).
“With thousands of Tennesseans’ coverage hanging in the balance, CHA’s financial success could not be guaranteed,” McPeak said in a statement. “Ultimately, the risk of CHA’s potential failure in 2016 was too great and would have caused substantial detrimental effects on the market as a whole if it were to collapse.”