Feds’ failure leaves thousands scrambling for health insurance
October 20, 2015
EAGLE COUNTY — More than 7,000 policyholders in the Rocky Mountain resort region will lose their health insurance if a state agency is allowed to force a low-cost co-op out of the state insurance exchange, effectively putting it out of business.
The Colorado Division of Insurance dropped Colorado HealthOP from the state insurance exchange because it says the co-op doesn't have enough cash in reserve. Division of Insurance Commissioner Marguerite Salazar ruled that without those reserves on hand, Colorado HealthOP could no longer sell health insurance.
Colorado HealthOP said that's not true and filed a lawsuit Monday to stop the Division of Insurance from removing it from the Connect for Health Colorado marketplace, the state insurance exchange established under the federal Affordable Care Act.
Independently certified actuarial projections indicate the company would be profitable by the end of 2016, making it possible to shore up its capital reserves and pay back its federal start-up loans early, said Julia Hutchins, Colorado HealthOP CEO.
"This lawsuit calls into question the DOI's decision to release us from Connect for Health Colorado marketplace as both irresponsible and premature," Hutchins said.
Nearly 40 percent of Coloradans who purchased health insurance through Connect for Health Colorado in 2015 are Colorado HealthOP members.
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On June 30, Colorado Health Insurance Cooperative, Inc. — Colorado HealthOP — had lost about $4.6 million in the previous year but had access to around $34.5 million to pay its bills, according to the National Association of Insurance Commissioners.
Rocking our region
Closing the co-op will force 7,000 policyholders in Eagle, Pitkin, Summit and Garfield counties to find other health insurance, which will be more expensive. They'll be among 83,000 Coloradans in the same boat — 79,000 individuals and about 3,000 group policies that were members of Colorado HealthOP.
Dozens of these new co-ops sprang up under the Affordable Care Act, and they're popular because they're much less expensive. They create a more narrow network of physicians and negotiate lower rates for their clients.
A 40-year old person in Summit County with a Bronze Level plan in Colorado HealthOp's more narrow network pays $208 per month. The same plan in a statewide network costs $327 per month.
Colorado HealthOP had planned to move into Eagle County beginning in 2016, Hutchins said.
If you don't buy health insurance, you'll face federal fines levied under Obamacare. Those penalties will get stiffer next year, up to 2.5 percent of your income, or as much as $2,085 per household.
"Locally, we're not in charge of this decision," said Kathleen Lyons, director of Eagle County's Health and Human Services Department. "We'll help people find an alternative plan."
In 2014, the health insurance costs in our four-county Colorado Rocky Mountain resort region were the nation's highest, a perch we managed to fall from this year, according to Colorado's Division of Insurance.
Earlier this month, the federal government said it would not fully reimburse funds promised under the Affordable Care Act, money earmarked to help insurers cover the sickest among us. It's called a risk corridor, and it's designed to limit the amount of money insurance companies can make or lose on policies sold on state insurance exchanges.
Insurers say they paid about $362 million into the program last year, but asked for $2.87 billion to cover their losses.
Colorado HealthOp received $2 million of the $16.2 million it had been counting on under that federal program.
Not getting the money it was expecting means the insurer is not meeting its financial reserve requirements, said Vincent Plymell, communications manager for the state Division of Insurance.
"They say they can turn this ship around. Our feeling is that it's irresponsible for us to take that chance," Plymell said.
If the co-op can't turn things around, policyholders will lose money, including the deductibles they've been paying into the program, Plymell said.
Hutchins said closing the co-op "prematurely" will force it to default on $72 million in federal start-up loans, money that Colorado HealthOP was poised to pay back early if allowed to continue to operate.
Taxpayers also would be on the hook for the co-op's wind-down costs, an estimated $40 million.
"The commissioner's hands are not tied. She has the discretion to work with us to overcome the injustice that was dealt by the federal government," Hutchins said.
HealthOP is the seventh co-op in the nation to collapse. Similar nonprofit insurers have failed in Kentucky, Louisiana, Iowa, Nebraska, Nevada, New York and Tennessee.
Why the feds didn't pay
First, this was a reimbursement program. Insurance carriers who fared better in the early years of the Affordable Care Act were to pay into a fund to help mitigate the risk of the carriers who ended up with more costly and sicker members. When the numbers were tallied, there were more carriers eligible for payment than carriers who had to pay into the fund.
Second, earlier this year Congress declared that the program had to be budget neutral. That means the feds could not use any other funds to make up the shortfall in the program.
Open enrollment begins Nov. 1, and people can begin signing up for different health insurance.
"It's inconvenient, but it becomes more than a matter of inconvenience if it happens in 2016," Plymell said.
Sen. Cory Gardner (R-Colo) called it another Obamacare failure.
"Once again, through absolutely no fault of their own, tens of thousands of Coloradans are facing the loss of their health insurance coverage," Gardner said. "Losing coverage puts tremendous stress on individuals and on families, and seeing it happen as a result of poor planning and bad policy is infuriating. This failure can be added to the very long list of Obamacare's broken promises. Taxpayers are on the hook for millions of dollars in loans given out to the co-op, money that will likely never be repaid. The years since Obamacare's passage have been marked by crisis after crisis in health care, and it's far past time for a new plan."
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