Co-Ops in Colorado, Oregon Announce Plans To Shut Down
Two cooperative health plans established under the Affordable Care Act announced on Friday that they will shut down, leaving just 15 of the original 23 co-ops in operation next year, The Hill reports. The closing co-ops are located in Colorado and Oregon (Sullivan, The Hill, 10/16).
The co-ops were the third and fourth to announce their closures in recent weeks, according to the Washington Post. All four cited lower-than-expected federal financial aid through the risk corridors program as a reason for their closures.
The ACA's risk corridors program is meant to help insurers in the early years of establishing premium rates for individual and small-group insurance markets under the ACA.
CMS earlier this month announced it will reimburse insurers 12.6% of the nearly $3 billion in risk corridors payments that the insurers had requested for 2014 (Goldstein, Washington Post, 10/16).
Co-ops were created under the Affordable Care Act to offer lower prices and compete with large insurers.
An HHS Office of Inspector General audit released earlier this year found co-op plans were facing financial difficulties and experiencing low enrollment. According to the audit, 22 of 23 co-ops operated at a loss in 2014. The report found 13 of 23 co-ops fell short of enrollment goals.
Kentucky Health Cooperative and Community Health Alliance in Tennessee in recent weeks have announced their closures. Four other co-ops have shut down this year (Washington Post, 10/16).
Colo. Co-op's Closure
On Friday, the Colorado Division of Insurance announced that it has ordered Colorado HealthOP to close, citing low returns from the risk corridors program. Colorado Insurance Commissioner Marguerite Salazar said, "Our decision is a direct result of this shortfall by CMS, and I sympathize with the HealthOP, but the Division has requirements and it has to protect consumers" (The Hill, 10/16).
However, the co-op plans to fight the state Insurance Division's order (Herman, Modern Healthcare, 10/16). Colorado HealthOP CEO Julia Hutchins called the state's decision "irresponsible and premature," noting that the action could hurt access to care. According to the Post, the co-op provides coverage for about 80,000 individuals, or nearly 40% of enrollees in the state's insurance exchange (Washington Post, 10/16).
Further, the co-op, which lost $23 million in 2014, was expected to make a profit in 2016 and is still owed $10 million in risk-corridors payments (Modern Healthcare, 10/16). Hutchins said the co-op will seek "all possible remedies" to stay open (Young, CQ HealthBeat, 10/16).
Oregon Co-op's Closure
Meanwhile, Health Republic Insurance in Oregon told the state's insurance department that it would cease operations by the end of the year.
The co-op also attributed its closure to low risk-corridors payments (Modern Healthcare, 10/16). Co-op President and CEO Dawn Bonder said, "The government's refusal to honor its risk corridor obligations represents a negative financial impact of over $20 million." She added, "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."
Health Republic has almost 15,000 enrollees and is one of two co-ops in the state. It will stop operating on Dec. 31 (Washington Post, 10/16).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.