A state court judge in Connecticut has approved an order officially putting HealthyCT, a struggling CO-OP carrier, in rehabilitation.
State Supreme Court Judge Antonio Robaina agreed Tuesday to let Connecticut Insurance Commissioner Katharine Wade serve as the rehabilitator of the health insurer.
Wade began the process of putting HealthyCT into rehabilitation in July. As previously announced, the Wallingford, Connecticut-based carrier is on track to shut down at the end of the year.
The official rehabilitation order lets Wade use HealthyCT assets to pay claims and to spend money on other “actual, reasonable and necessary costs of preserving or recovering the assets of HealthyCT,” including “compensation and other costs related to representatives and employees of HealthyCT.”
Agents and brokers are supposed to account for all earned premiums and commissions, and to pay all premiums owed to HealthyCT within 30 days. Agents and producers are not supposed to “use premium monies owed to HealthyCT for refund of unearned premiums or for any purpose other than payment to the rehabilitator,” according to the order.
The founders of HealthyCT started it in April 2013 with $76 million in startup and solvency loan support from the Affordable Care Act Consumer Operated and Oriented Plan program, according to an affidavit filed in connection with the case by Kathryn Belfi, the director of the financial regulation division of the Connecticut Insurance Department.
The CO-OP borrowed more money from the federal Centers for Medicare & Medicaid Services (CMS), the agency running the CO-OP program, and it owed CMS about $128 million on Sept. 20, 2015, Belfi says in the affidavit.
The company ended 2015 with $36 million in capital and surplus.
CMS was supposed to send the CO-OP support from an ACA risk corridors fund by June 30, 2016. The ACA risk corridors program was supposed to use cash from thriving exchange plan issuers to help struggling issuers in 2014, 2015 and 2016. CMS has been able to collect only enough cash from thriving issuers to pay about 13 percent of the program obligations, and Congress has refused to let the agency use other cash to pay the obligations.
Because of the funding shortfall, CMS withheld $20 million in risk corridors program payments, Belfi says in the affidavit.
CMS also has told the CO-OP it must pay $13.4 million into the ACA risk-adjustment program, a program that’s supposed to use cash from individual and small-group coverage issuers with relatively low-risk enrollees to compensate issuers with higher-risk issuers, Belfi says.
HealthyCT had about 40,000 enrollees when it failed. The $36 million in capital hits related to the ACA risk corridors program and risk-adjustment program cost the company almost $1,000 per enrollee. The hits left the company with $3.5 million in debt as of Aug. 31, 2016, rather than a surplus, according to Belfi.
Originally, drafters of the ACA and ACA program managers expected the ACA risk corridors program and the ACA risk-adjustment program to cushion health insurers against unexpected ACA program startup problems.
Some small insurers, and some large insurers, have argued that the two ACA risk-management programs have backfired, and that the programs have acted to destabilize health insurers rather than to stabilize health insurers.
Molina Healthcare, a Long Beach, California-based insurer, recently reported that the ACA risk-adjustment program has shifted about 25 percent of its ACA exchange plan premium revenue to competitors.
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