By Jill Zorn
It looks like Connecticut’s non-profit health insurance co-op, HealthyCT, is going out of business.
The co-op owes $13.4 million to the federal government’s Affordable Care Act (ACA) “Risk Adjustment Program.” A start-up that has yet to turn a profit, HealthyCT cannot afford a payment of this magnitude. As a result, Connecticut Insurance Commissioner Katharine Wade has ordered HealthyCT to stop selling insurance and to begin winding up their operations.
The closing of HealthyCT is a huge blow to consumers.
When HealthyCT began offering insurance in 2014, they were the first non-profit carrier to operate in Connecticut for quite some time. Unless there is a new entrant next year, this will leave only two “competitors” in the state’s health insurance marketplace, AccessHealthCT.
The loss of our locally-based, member-governed health insurance co-op is heartbreaking.
But it is infuriating to read that Anthem’s Connecticut-based health plan will be PAID almost $51 million by the same risk program.
Besides HealthyCT, another co-op, Land of Lincoln, in Illinois, is also in the news for its risk of closing. At least there, Acting Department of Insurance Director Anne Melissa Dowling (formerly an official in Connecticut’s Insurance Department), has actually ordered the co-op to NOT pay the fee.
In Maryland, the Evergreen Co-op has been hit by a similar penalty by the Risk Adjustment Program. Although it appears Evergreen will survive the substantial hit to their bottom line, they are fighting back. In June they announced they are suing the federal government:
“We’re quite confident we’ll survive,” (Evergreen CEO Peter) Beilenson said. “But this is an outrageous sum of money being sent from one insurer to another that doesn’t need it and doesn’t deserve it.”
Beilenson said he was told by federal regulators that CareFirst BlueCross BlueShield, the largest insurer in the state, would be the primary recipient of risk adjustment payments in Maryland…
The payments are a significant burden for small companies with relatively small operating budgets and reserves, Beilenson said. The hardship the payments create for small companies contrast sharply to the benefit they offer the large recipients, Beilenson said. While $22 million represents about a quarter of Evergreen’s 2015 revenue, CareFirst has a reserve of about $1.5 billion.
“It is a grossly unfair system,” Beilenson said.
The non-profit co-ops are already an endangered species.
The reasons the co-ops have struggled are many. But it is ironic that one major cause is a federal program that was supposed to help balance out risk among insurance plans. Instead the risk adjustment program has turned out to hurt the co-ops more than many other established health plans.
On June 30, 2016, HHS released data on risk adjustment numbers for 2015. Of the 10 remaining CO-OPs, nine will have to pay into the risk adjustment program for 2015; only one remaining CO-OP—Community Health Options (Maine and New Hampshire)—will receive a risk adjustment payment. Community Health Options will receive about $710,000 in risk adjustment funds.
Originally 23 co-ops were established under the ACA — as of the end of June less than half of them were still operating. Now, unless our insurance commissioner intervenes as happened in Illinois or the federal government can quickly modify the Risk Adjustment Program – probably both highly unlikely scenarios – Connecticut’s co-op will be the next casualty. In an era of insurance mega-mergers, this loss of a non-profit, local insurance choice is a major setback for Connecticut consumers.
Note: HealthyCT is not closing immediately. Any current HealthyCT policy holders are covered until the end of their enrollment period.