Concerns about the newly released Affordable Care Act risk management program results for 2015 have contributed to the sudden death of a nonprofit, member-owned health insurer in Oregon.
Officials at the Oregon Department of Consumer and Business Services say they have filed for state court approval to put Oregon’s Health CO-OP in receivership, and to have its operations end July 31.
Oregon’s Health CO-OP ended March with 11,800 individual coverage holders and about 8,800 in large and small group plans. All of the current enrollees will need new coverage Aug. 1, officials say.
Oregon is starting a special enrollment period process for all affected enrollees today. The affected consumers have until July 31 to apply to have replacement coverage take effect Aug. 1, officials say.
“They can enroll through HealthCare.gov to access financial help or enroll directly through an insurance company or broker,” officials say. “Consumers must pay the premium to their new insurer for the plans to take effect.”
Insurance regulators in Connecticut announced last week that they were putting that state’s CO-OP, HealthyCT, under supervision and having it shut down at the end of the year.
Oregon began January 2014 with two carriers created using ACA Consumer Operated and Oriented Program loan funding.
Oregon carriers’ confidence in the ACA risk-management programs was strong, and competition in the state’s individual health market was fierce. Widespread carrier losses in 2014 and 2015 led state regulators to take the unusual step of requiring five insurers to charge more for individual coverage in 2016 than they had originally suggested.
ACA drafters created three big risk management programs to help health insurers cope with new ACA product design rules and underwriting restrictions: a temporary reinsurance program, which has been using cash from all carriers to help issuers of ACA-compliant individual coverage with catastrophic claims; a temporary risk corridors program, which is supposed to using cash from thriving exchange plan issuers to help struggling issuers; and a risk-adjustment program
The ACA reinsurance program paid CO-OPs more than they were expecting, but the Centers for Medicare and Medicaid Services (CMS) stunned the CO-OPs, and other carriers, in October 2015, by warning them that the risk corridors program would pay only about 13 percent on the dollar.
CO-OPs were hoping to get cash from the ACA risk-adjustment program, but many attracted enrollees who appeared, at least on paper, to be healthier and lower-risk than average, and those CO-OPs had to pay cash into the risk-adjustment program, rather than getting cash from the program.
CMS told Oregon’s Health CO-OP June 30 that it’s on track to get $4.6 million in ACA reinsurance cash, and $4.8 million in ACA risk-adjustment program cash for individual enrollees. But CMS said the CO-OP may have to pay $6.7 million into the ACA risk-adjustment program for small-group enrollees. Carriers can negotiate with CMS on the final ACA risk program payment amounts through an appeals process.
Oregon’s Health CO-OP lost $18.4 million in 2015, and the company said an announcement of its receivership status that it has been experiencing high medical loss ratios this year.
Patrick Allen, director of the Oregon Department of Commerce and Business Services, said in a statement that shutting the carrier down in the middle of the year was necessary because of the sudden deterioration of the carrier’s financial position caused by a combination of the losses in 2015 and the disappointing 2015 risk program numbers.
“Unfortunately, as a startup, Oregon’s Health CO-OP is not in a position to sustain these losses while meeting its obligations to policyholders,” Allen said. “We are working closely with the company on an orderly wind-down of its business.”
Phil Jackson, chief executive officer of the CO-OP, said in a statement that having the CO-OP continue to try to operate is no longer feasible.
“The board of directors agreed that it is in the best interests of our members and community that we wind down our operations,” Jackson said.
Jackson said the CO-OP is working with regulators to develop a shutdown plan that will be shared with brokers and other interested parties. “We appreciate all that the broker, employer and provider communities have done to support us,” Jackson said.