Insurance co-ops in Colorado and Oregon face closure

By Bob Herman
October 16, 2015 - Modern Healthcare

The trouble surrounding the Affordable Care Act's co-op health insurance program is nearing disaster-level status. On Friday, the Colorado Division of Insurance said it would close Colorado HealthOP, but the company plans on fighting the state's decision, calling it “irresponsible and premature.”

Also on Friday, Health Republic Insurance, a co-op in Oregon, notified its state insurance department that it was winding down its business by the end of the year. Health Republic covers 15,000 individuals and small-group employees.

Colorado HealthOP's potential demise and Health Republic's more-certain closure come just days after Community Health Alliance, the co-op in Tennessee, voluntarily decided to close its doors. Assuming Colorado HealthOP can't reverse the state's determination, the Colorado and Oregon companies would mark the seventh and eighth co-op closures and a serious blow to the entire co-op program.

It would also throw Colorado's insurance exchange into turmoil during the next open-enrollment period, which starts Nov. 1. Colorado HealthOP covers more than 80,000 people, or roughly 40% of the state's exchange population.

“I've had better days,” Colorado HealthOP CEO Julia Hutchins said Friday. “In some ways it's so tragic. It's ultimately a political decision.” She noted that the insurer, which lost $23 million in 2014, was projected to make a profit in 2016. But state insurance departments “are not in the business of looking forward” and did not have “the political cover to allow us to continue,” Hutchins said.

The spate of recent co-op closures has been tightly related to the federal government's announcement to pay only 12.6% of risk-corridor claims. The risk corridor program is one of three insurance programs built into the ACA that try to help stabilize the individual marketplace during the first few years. Insurers that enroll sicker, more expensive members request risk-corridor funding, while those that have healthier customers pay into the pool. Risk-corridor payment requests ($2.9 billion) far exceeded what plans paid into the fund ($362 million) for 2014.

Originally, the risk corridor program did not have to be budget-neutral. But Republican members of Congress, who dislike President Barack Obama's health law, inserted a provision in the government's 2015 budget bill that restricted how HHS could make the risk-corridor payments, essentially making the program budget-neutral.

Hutchins said her co-op, which is still owed $10 million in risk-corridor payments, would pursue “all possible remedies” to stay open, including working closely with the national co-op trade group to see what could change at the federal level. She hopes the Obama administration takes measures that pay out smaller insurers first or move surplus funds.

Health Republic also blamed its situation on the lack of risk-corridor funds. The Oregon co-op is still owed $20 million.

In an interview this past Monday, before Hutchins knew the state would make any decision, she lamented how the co-op program “got caught up in politics around healthcare reform.”

“We all want healthcare to be affordable and also to be there when you need it, and having co-op member-governed plans to provide transparency and accountability in marketplaces is really important,” Hutchins said Monday. “And it's so unfortunate that this had to be part of a law itself that's so political, because the concept of what we are and what we stand for is nonpartisan.”

A CMS spokesperson referred to the agency's previous statements about the risk-corridor payments, saying it was aware lower-than-expected funds “may raise solvency concerns” and “immediately contacted states and insurers” to help them through the process.

The co-ops that folded before Colorado HealthOP, Community Health Alliance and Health Republic were Kentucky Health Cooperative, Health Republic Insurance of New York, Nevada Health CO-OP, Louisiana Health Cooperative and CoOportunity Health.