Fifth Obamacare insurance co-op folds up
12 Oct 2015
The Kentucky Health Cooperative, which sold 75 per cent of the policies bought through the health-insurance exchange in the state, is folding up due to heavy losses and Congress cutting subsidies for insurers who ended up with a costlier group of policyholders under the federal health-reform law.
The firm joins the Health Republic Insurance of New York - the largest health co-op with over 150,000 members - which announced last month that it was ceasing operation.
That in turn followed the declaration of insolvency by CoOportunity Health in Iowa and Nebraska and the failures of the Louisiana Health Cooperative and Nevada Health Co-Op. A total of 400,000 citizens had been impacted so far.
The Kentucky Health Co-operative had been awarded $146.5 million in taxpayer loans, which included $65 million in solvency funding as recently as November of 2014. Premium hikes of over 20 per cent for 2016 had been approved.
The company had also been banking on risk-protection payments from other insurers to stay solvent. It had asked for $77 million from the risk corridor programme however, it learned it was to receive only $9.7 million, CEO Glenn Jennings said.
Health Republic Insurance of New York was the largest of the non-profit cooperatives, and was shut down by regulators after losses amounting to $52.7 million in the first six months of the year.
''It is with sadness that we announce this decision," the insurer's CEO, Glenn Jennings, said in a statement. "This very difficult choice was made after much deliberation. If there were a way to avoid it and simultaneously do right by the members, providers and all others that we serve, we would do so.''
According to the Department of Health and Human Services, it recognised that the low payments to insurers could have raised financial concerns for some insurers, and that as start-ups, not all co-ops would succeed.
At the time of the risk corridor announcement earlier this year, the Obama administration said the low payments could cause ''isolated solvency and liquidity challenges'' for a small number of insurers.
''CMS's priority is to make sure that Marketplace customers have access to quality, affordable coverage through the Marketplace,'' said HHS spokesman Ben Wakana, referring to the federal agency that helps oversee the health law.
''We are working with Kentucky officials to do everything possible to make sure consumers stay covered.''