Another nonprofit, member-owned CO-OP carrier is facing serious financial problems, and the CO-OPs’ trade group says the federal government should be doing more to help the carriers stay in the market.
The Colorado Division of Insurance today announced that it will decertify the Colorado Health Insurance Cooperative, which has been doing business as Colorado HealthOP, and keep the carrier from selling health coverage through Colorado’s Patient Protection and Affordable Care Act (PPACA) public health insurance exchange for 2016.
Colorado HealthOP can continue to meet obligations to existing policyholders, but it cannot sell new individual or small-group plans or renew existing individual or small-group coverage for 2016, officials said.
Officials said the recent announcement by the Centers for Medicaid and Medicare (CMS) that a major PPACA risk management program, the risk corridors program, will likely pay less than 13 cents per dollar in obligations to health insurers for 2014, contributed to their decision to take action against the carrier.
Managers of the carrier started it with funding from the PPACA Consumer Operated and Oriented Plan (CO-OP) program. Because of the shortfall in risk corridors funds, “the HealthOP does not meet the state’s minimum capital and surplus requirements,” officials said in a statement. “The state requires insurance companies to maintain a certain level of capital and surplus to act as a rainy day fund should the company have a number of very sick people with very high cost claims. Without enough money in that rainy day fund, a company would not be able to pay the claims for its members.”
Insurance regulators have had the carrier under supervision since February. The carriers has been meeting the state capital and surplus requirements, but “not receiving the risk corridor payment means the Colorado HealthOP’s rainy day fund will be completely wiped out, and is in fact expected to be in the negative by $34 million by the end of the year,” officials said.
The insurer has about 83,000 enrollees, including about 80,000 with individual policies and 2,908 with small-group coverage.
About 40 percent of the state’s 2015 public exchange plan purchasers have Colorado HealthOP coverage.
Colorado HealthOP managers said independently certified actuarial projections showed the company would be profitable in 2016, while making significant contributions to capital reserves.
“The CO-OP’s wind-down will cost taxpayers an estimated $40 million, an expense that could be avoided if the CO-OP were allowed to continue its operations,” managers said. “The premature closure of Colorado HealthOP will cause the CO-OP to default on $72 million in federal startup and solvency funding, loans that Colorado HealthOP was poised to pay back early if allowed to continue to operate.”
Managers of Colorado HealthOP “will continue its fight, pursuing all possible remedies, to serve Colorado,” Julia Hutchins, the carrier’s chief executive officer, said in a statement.
Still another CO-OP, Health Republic Insurance of Oregon, has also announced plans to wind down its operations by the end of the year. That CO-OP was set up with help from the same team that set up New York state’s CO-OP, which is also in the process of closing.
The Tennessee CO-OP announced plans to close earlier in the week.
Kelly Crowe, chief executive officer of the CO-OPs’ trade group, the National Alliance of State Health CO-OPs (NASHCO), said in a statement that the federal government should make “a firmer commitment to fulfill the obligations of the [PPACA] risk programs” to “provide stability to the marketplaces.”
“This week’s news should not be viewed as start-up failures, but rather closures due to unfulfilled promises,” Crowe said. “Indeed, under the right conditions, CO-OPs have proved their models can be successful in providing quality health insurance to Americans who need it most; a mission NASHCO’s members look forward to meeting in 2016 and beyond.”