Private Payers News

Co-ops on Health Insurance Exchanges Need Greater Surveillance

The state of New York will likely need stronger surveillance of the health insurance exchanges if it is to reverse the trend of public health insurers falling by the wayside.

By Vera Gruessner

- The Patient Protection and Affordable Care Act has influenced greater health coverage among American citizens through establishing state health insurance exchanges. However, when creating this platform, a number of Democratic congressmen were concerned that a gathering of private payers within the health insurance exchanges could pose a problem for consumers such as offering only costly coverage plans.

Health Insurance Marketplace

As such, a public, government-run option was created called the consumer-operated and oriented plan or co-op.  However, according to the Empire Center for Public Policy, 12 out of the 23 insurance co-ops established under the Affordable Care Act were shut down as of January 1.

For example, the Health Republic Insurance of New York lost money at a rapid pace and policymakers had to close down the program on November 30, which led to the breakdown of healthcare coverage among 215,000 customers and left many healthcare providers and hospitals unpaid claims in the millions of dollars.

“The closure of the plan meant individuals and businesses insured by Health Republic, more than 200,000 total, had to scramble to find alternative coverage in a busy time for healthcare enrollment,” the Albany Business Review reported. “Brokers in the Albany area had trouble getting answers about the transition. Doctors and hospital groups are also concerned about the pending bills owed by Health Republic, with some calling for the creation of a fund to cover those debts and any future plan collapses.”

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  • Among New York policymakers, there seems to be major issues regarding oversight of the health insurance field, the report from the Empire Center for Public Policy concluded. The Health Republic Insurance of New York had unveiled increasing operating losses and a large amount of debt before being shut down.

    The background regarding the Health Republic Insurance of New York starts in 2013 when the Centers for Medicare & Medicaid Services (CMS) accepted the public insurer into its co-op program and financed it with $174 million, which was a higher amount than any of the co-ops received.

    Start-up costs of the public insurer were around $24 million while the rest was considered “solvency” loans necessary to make sure a payer can reimburse its medical claims. As time went on, CMS increased the organization’s solvency funds and the Health Republic Insurance of New York later withdrew another $209 million.

    When the payer first opened its doors, some key differences were in stark contrast from its competitors including very low premiums and a broad provider network including New York City’s Memorial Sloan Kettering.

    The most commonly chosen option – the silver package plan – actually had the lowest premium cost among seven of the eight regions across the state. The health insurer beat out every other payer selling plans on the health insurance exchanges with regard to enrollment numbers.

    “It was increasingly clear that Health Republic would collect only a fraction of what it was due. Officially, though, the full amount appeared on its balance sheet as a ‘receivable,’ helping make the company look solvent on paper,” the report from the Empire Center for Public Policy stated.

    “And the more money Health Republic lost on operations, the bigger that theoretical asset grew. When the company filed its June 30 quarterly report, its ‘receivable’ from risk corridors had mushroomed to $243 million.”

    “The exact amount of Health Republic’s risk corridor losses remained unclear when its shutdown was ordered on Sept. 25. Six days later, CMS announced that it would reimburse companies just 12.6 percent of what they were owed under risk corridors, 14 wiping almost $200 million from Health Republic’s books.”

    All of these excessively low prices led the co-op to run a deficit instead of a surplus and may have brought on its own demise. The state of New York will likely need stronger surveillance of the health insurance exchanges if it is to reverse the trend of public health insurers falling by the wayside.