Health Republic is latest health care co-op to end
Limits on funds, reimbursement cutbacks hurt, meaning 12 of 23 such plans have failed
About 200,000 New Yorkers will see their Health Republic policies expire Monday, marking the demise of the 12th health insurance co-op established under Obamacare.
That’s more than half of the 23 consumer operated and oriented plans that were created with federal loan money to promote competition on the state online exchanges selling insurance under the 2010 health care law.
The 12 co-ops, which received $1.2 billion in taxpayer-funded loans, failed for a variety of reasons, including:
Severe limits on using loan money for marketing or attracting outside investment
money.
Under-priced premiums in the case of some co-ops and overpriced premiums in other cases.
Congressional budget-cutting that reduced the original $6 billion in grants and loans to $2.4 billion of only loans.
Unexpected sharp cutbacks in reimbursement rates under a federal “risk adjustment” formula that moves money from companies with healthier customers to those with sicker ones.
Several co-ops said they wouldn’t be able to enroll new customers in 2016 after the Centers for Medicare and Medicaid Services announced that certain reimbursement rates would be 12.6% of what had been expected. Eighteen coops were denied money they were expecting, according to Martin Hickey, CEO of New Mexico Health Connections and chairman of the National Alliance of State Health CO-OPs.
Health Republic received $265 million in federal loan money. Despite its 29% enrollment growth (from 155,400 policyholders in 2014 to 200,000 as of June), New York regulators ultimately decided it couldn’t afford to continue operating even until the end of the year, when the next enrollment period begins.
Despite the failures, the co-ops have positively affected health insurance premiums, according to John Morrison, a founder of the National Alliance of State Health CO-OPs. The price of the average silver (mid-level) insurance plan in 2014 was 8% lower in states with a health care co-op than in those without one, and that rose to 13% this year, Morrison said at a House hearing this month.
Former senator Kent Conrad, D-N.D., who first proposed establishing co-ops under the Affordable Care Act, blames their failure on “fierce lobbying” by the insurance industry, “systematic sabotage” by congressional Republicans and general indifference by the Obama administration.
Congressional Republicans say the co-ops’ failure is another example of why the Affordable Care Act should be scrapped. “We are witnessing Obamacare imploding onto itself,” Rep. Chris Collins, R-N.Y., said. “Obamacare, as it was designed, was not sustainable.”