Of the 23 consumer operated and oriented plans (CO-OPs) launched under the Affordable Care Act, 12 will officially be closed Jan. 1. A new report examines the collapse of the largest CO-OP, blaming a breakdown in state oversight of the health insurance industry for its demise.
Health Republic of New York was experiencing financial troubles in the summer, but rather than trying to fix the problem with premium increases, the Department of Financial Services (DFS) cut premium prices further, which heightened Health Republic's financial crisis, according to the nonpartisan research organization known as Empire Center. The fact that Health Republic was running in the red was confirmed by its quarterly filings with federal and state regulators, the report said.
This chain of events raised the question of whether the department's regulatory judgment was clouded by the political desirability of keeping health insurance prices artificially low in the short term, according to Empire Center.
In fact, UnitedHealth Group CEO Stephen Hemsley expressed concern, in a conference call back in April 2014, about the trend of "unsustainable pricing levels" in New York plans, including new entrants to the individual market.
The report goes on to say that had New York's regulators ordered higher rates for Health Republic, the CO-OP could have avoided some of the steep losses that made it so dependent on risk-corridor funding. The risk corridor program experienced a significant shortfall in insurer payments for 2014, which was especially damaging to smaller insurers and CO-OPs.
Because New York's market is so competitive, the bottom line is "inadequate rates will result in reducing product choice or otherwise destabilizing the market, which is ultimately harmful to the healthcare system as a whole and to the consumers who rely on it," the report states.
Despite Health Republic closing, the state's DFS is still optimistic about those looking to replace their healthcare coverage, saying that an additional 16 insurers in the state will sell plans on the exchange during the upcoming enrollment period, FierceHealthPayer has reported.
To learn more:
- here is the report