The top New York state financial services regulators have taken a step toward officially putting Health Republic Insurance of New York Corp. into liquidation.
Maria T. Vullo, the state’s acting superintendent of financial services, announced Friday that she has obtained a court order scheduling a hearing on a proposed liquidation order for the Consumer Operated and Oriented Program (CO-OP) plan.
New York State Supreme Court Judge Arthur Engoron scheduled the hearing for 9:30 a.m. May 10.
The current order limits parties’ ability to take legal actions against Health Republic. At the hearing, the judge will appoint Vullo as the liquidator and let a liquidation process proceed, according to a guide to the liquidation process posted on Health Republic’s website.
Barbara Davis, the chair of the Health Republic board, signed a letter consenting to the entry of a state order of rehabilitation or liquidation on Oct. 28, 2015. The board of the company certified Davis to make that consent, Davis wrote in the letter.
Drafters of the Patient Protection and Affordable Care Act (PPACA) created the CO-OP loan program in an effort to increase the level of competition in the commercial health insurance market. The organizers of Health Republic used $265 million in CO-OP loans from the Centers for Medicare & Medicaid Services (CMS), a unit of the U.S. Department of Health and Human Services (HHS), to start the company, Vullo said in a petition.
See also: Empire State CO-OP courts brokers
The organizers of the New York Health Republic said while it was in operation, the company was legally separate from the Health Republic CO-OPs in Oregon and New Jersey. The Oregon CO-OP closed at the end of 2015. The New Jersey CO-OP is still in operation.
The New York Health Republic had 215,000 enrollees when regulators shut it down in September, including 72,000 individual exchange enrollees, 34,000 off-exchange individual enrollees, 5,700 small-group exchange enrollees, 87,000 off-exchange small-group enrollees, and 16,000 private exchange enrollees, according to the petition.
An audit showed that the company was in poor financial condition and would have to close at the end of the year, and the company learned in October 2015 that it was likely to get just $18.8 million of the $149.3 million PPACA risk corridors program money it was expecting, according to the petition.
The program actually paid Health Republic only $18.1 million, according to the petition.
The risk corridors program was one of the “three R’s,” or risk management programs that drafters may try to stabilize the commercial health insurance market as PPACA changes took effect in January 2014. The program was supposed to use cash from thriving exchange plan issuers to help struggling issuers, but it took in less cash from thriving issuers than PPACA drafters had anticipated.
Vullo said in the petition that her department is still trying to recover cash from other parties, “including as to the ’3R’ payments Health Republic had expected to receive from the federal government.”
“The total amount of Health Republic’s liabilities will likely not be known for some time, after all claims have been submitted and the liquidator has completed the review of the Health Republic’s books and records,” officials say in a liquidation filing announcement.
The New York Health Republic was not covered by a guaranty fund. Lawmakers in the state have been debating how to handle claims against the CO-OP.
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