UnitedHealth says rates for its N.Y. plans too low in light of CO-OP collapse

The collapse last year of Health Republic of New York, the country's largest consumer operated and oriented plan (CO-OP), is reverberating to other insurers on the state's insurance exchange, including UnitedHealth Group.

UnitedHealth, the largest U.S. health insurer, said its rates for plans offered under the Affordable Care Act in New York may be too low because of the failure of Health Republic, according to Bloomberg Business. The CO-OP's closure may lead to shortfalls in risk-adjustment payments designed to stabilize the markets created under the ACA, the report said.

At a New York state Senate round table meeting Wednesday, William Golden, UnitedHealth's northeast region CEO, said the company's rates are "substantially too low" because they were set in anticipation of risk-sharing payments that now may not be made, according to the Bloomberg report. The ACA's risk-adjustment program redistributes funds from insurers who have low-risk, low-cost patients, to those with less healthy, more expensive beneficiaries. The closure of Health Republic means the CO-OP won't pay into the risk-adjustment program reducing funds available to other insurers on the state exchange.

Health Republic was one of 23 CO-OPs launched under the ACA and one of 12 across the country officially closed as of Jan. 1 because of financial troubles.

Health insurance industry leaders have criticized New York's rate-review process, with Paul Macielak, of the New York Health Plan Association, saying state regulators let Health Republic set rates that were too low for its plans, Bloomberg reported. A report released in November blamed the CO-OP's failure on a breakdown in state oversight of the insurance industry.

HealthNow New York Inc. CEO David Anderson said Health Republic was allowed to charge lower rates than his company even though its plans offered more generous benefits. "To have rates lower and costs that were higher is not sustainable. I don't think you need to be a Harvard MBA to see that," he said at the round table.

Financial losses have already led UnitedHealth to rethink its role in the ACA exchanges. The company announced late last year that it is revising its earnings outlook to account for losses in the exchanges and will decide in the first half of 2016 to what extent it will continue to participate in public exchange markets in 2017.  

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