Nearly a third of the innovative health insurance plans created under the Affordable Care Act will be out of business at the end of 2015, following announcements Friday that plans in Oregon and Colorado are folding.
In just the past week, four co-ops, as the nonprofit plans are known, have decided or been ordered to shut down. Their demise means that eight of the 23 co-ops in existence a year ago will be unavailable to consumers shopping for 2016 coverage through insurance marketplaces created under the ACA.
Federal health officials have been cracking down recently on many of the plans, warning them that their finances, enrollment or business model needed to shape up. Some state regulators have applied pressure of their own.
But it was a move by the Department of Health and Human Services that the four closing co-ops say was critically destabilizing. HHS announced Oct. 1 that it could afford to pay insurers participating in the federal and state-run exchanges just 12.6 percent of nearly $3 billion they were owed under a temporary provision of the health-care law. Known as risk corridors, it is intended to help cushion insurers that end up with sicker customers and bigger medical claims than they had anticipated.
The CEO of the National Alliance of State Health CO-OPs, Kelly Crowe, labeled the latest collapses a “devastating blow to Americans who seek competition, choice, innovative benefits, and non-profit alternatives when selecting a health insurer.” In a statement, Crowe noted that “few businesses can sustain hits like the CO-OPs and other small and new insurance companies have endured” because of the federal government’s reversal on the risk corridor dollars.
A spokesman for the Centers for Medicare and Medicaid Services, which oversees the exchanges, said the agency recognizes that those lower-than-expected payments “may have raised additional solvency concerns.”
The priority of CMS “is to make sure that marketplace customers have access to quality, affordable coverage,” Aaron Albright said late Friday. “We are working with Colorado and Oregon officials to do everything possible to make sure consumers stay covered.”
State regulators made the closure call for the Colorado HealthOP, saying they would decertify it from the insurance marketplace there. The co-op immediately denounced the move, blasting the federal government’s “failure to pay billions of dollars in promised funding” and pointing out that projections indicated the plan would be profitable in 2016.
CEO Julia Hutchins called the state’s action “irresponsible and premature” and contended it would hurt access to low-cost health-care options. She vowed to fight the shutdown directive, although her statement did not elaborate on how the plan would do so. The co-op has more than 80,000 members, accounting for nearly 40 percent of residents with coverage through the Colorado insurance exchange.
The Health Republic Insurance Co. of Oregon also blamed the sharp cut in federal payments for its demise. The plan, which has nearly 15,000 members and is one of two co-ops in that state, will cease operation on Dec. 31.
“The government’s refusal to honor its risk corridor obligations represents a negative financial impact of over $20 million,” president and CEO Dawn Bonder said in a statement. “This has placed us in a difficult financial position that could jeopardize our members and partners. As a result, we believe the most ethical step is for Health Republic to refrain from entering the market in 2016.”
The co-ops in Tennessee and Kentucky each cited the federal funding shortfall in their closure announcements as well. In the two states, more than 82,000 consumers will now be forced to find other coverage for next year.
The ACA’s third open-enrollment season begins Nov. 1.