Largest U.S. Co-Op Health Plan To Fold, Fourth To Close This Year

Health Republic Insurance of New York, the largest cooperative health plan in the U.S., has been ordered to shut down as it nears insolvency, affecting hundreds of thousands of enrollees' coverage, the Washington Post reports.

Background

Co-ops were created under the Affordable Care Act to offer lower prices and compete with large insurers (Goldstein, Washington Post, 9/25).

An HHS Office of the 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 (HHS OIG audit, July 2015).

According to the Post, many of the co-ops have struggled breaking into the health insurance market, but Health Republic had gained popularity and enrolled more than 150,000 individuals in its first year. By this summer, the co-op had about 210,000 members. It also was the second most popular individual insurer out of 16 on New York's ACA insurance exchange, enrolling about 75,000 consumers (Washington Post, 9/25).

However, Health Republic struggled financially, as it attracted some of the sickest and costliest consumers, Modern Healthcare reports. As result, the co-op lost about $53 million in the first half of 2015 and about $78 million in the first half of 2014 (Herman, Modern Healthcare, 9/25).

Closure Details

New York state officials on Friday ordered Health Republic to stop writing new policies and close its business after existing policies expire (AP/New York Times, 9/25).

Anthony Albanese, acting superintendent of the New York Department of Financial Services in a statement said, "Given Health Republic's financial situation, commencing an orderly wind-down process before the upcoming open enrollment period is the best course of action to protect consumers" (Modern Healthcare, 9/25).

DFS officials said that current individual coverage should continue through Dec. 31 for about 108,000 consumers, most of whom had purchased coverage through the state exchange. Meanwhile, the state Department of Health said the small group plans covering 101,500 also would remain effective.

The agencies said they would evaluate the next steps for the policies based on Health Republic's finances.

Meanwhile, Health Republic said it would continue processing claims through the end of 2015 (AP/New York Times, 9/25). Co-op enrollees will need to select new coverage on the state exchange when the ACA's third open enrollment period begins Nov. 1.

In statement, the co-op said, "While we are deeply disappointed with this outcome, we believe it is in the best interests of our members." The not-for-profit added, "Starting a new insurance company is a daunting task in any environment, but the challenges placed on us by the structure of the co-op program as enacted by a bitterly partisan Congress were simply too difficult to overcome."

Health Republic is the fourth co-op to shut down this year (Modern Healthcare, 9/25).