Ohio Insurance CO-OP Becomes 13th of 23 Plans to Fail

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By Sara Hansard

May 26 — A nonprofit health insurer in Ohio created with federal funding under the Affordable Care Act became the 13th of 23 such plans to fail May 26.

Lt. Gov. Mary Taylor (R), who is also the Ohio director of insurance, was appointed receiver for Coordinated Health Mutual Inc., which insured nearly 22,000 Ohioans, largely in the Cincinnati and Dayton areas, under its InHealth Mutual brand. “Our examination of the company's financials made it clear that the company's losses would prevent it from paying future claims should its operations continue,” Taylor said in a release.

The failure of a majority of the Consumer Operated and Oriented Plans, which received $2.4 billion in federal funding to provide more competition in the ACA health insurance marketplaces, has been one of many contentious issues revolving around the health-care law. Congressional Republicans have pushed the Obama administration to recoup funds from the CO-OPs.

Company Asked to Be Liquidated

The action, approved by Franklin County Court of Common Pleas, came after the company asked the state Department of Insurance (DOI) to put it in liquidation, Taylor told Bloomberg BNA in an interview May 26. “This is not an adversarial position that we are taking,” she said.

The CO-OP, which sold policies in the individual and group markets, had a net loss of more than $79 million in 2015, and it lost more than $29 million in the first three months of 2016, Taylor told Bloomberg BNA. The DOI determined that the company would not be able to pay future claims and expenses, she said.

The federal government has provided $129.2 million in funding for InHealth, according to the House Energy and Commerce Committee.

The company won’t take on additional customers, but current enrollees can keep the coverage for 2016, Taylor said. However, she said the DOI is encouraging enrollees to shop on the federal ACA marketplace.

“They may choose to pick up another plan to make sure they are eligible for federal subsidies,” because it isn't clear if enrollees can continue to receive the subsidies now that the company is in liquidation, she said. The release said policyholders should visit the federal exchange within the next 60 days to replace their policy with a new one.

No `Definitive Answer' on Special Enrollment

Taylor said the state also doesn't have a “definitive answer” on whether InHealth enrollees will qualify to sign up for new coverage under a special enrollment period, because the regular open enrollment period for 2016 coverage has ended. “Our expectation is that CMS would say that this qualifies for a special enrollment period,” she said.

Under the court order, InHealth policyholders who keep their policies must continue to pay their premiums, providers must continue to honor their contract for service and vendors must work with the state DOI to provide necessary services to the company.

Risk Adjustment Payments a Factor

Taylor also told Bloomberg BNA that payments InHealth had to make under the ACA risk adjustment program were a “contributing factor” in its failure. In a resolution filed in court, the company's board said the company was required to pay $3.4 million for 2014 under the program, under which insurers that have healthier members must pay insurers that attract members with high medical claims.

The company also has a liability of $6.2 million for its 2015 financial results, but it didn't receive any of the estimated $47 million from the ACA's risk corridor program because Congress didn't fund that program, the board said in the resolution.

The risk corridor program is a separate temporary premium stabilization program created under the ACA, but congressional Republicans pushed to limit funding for the program in a budget law signed by President Barack Obama in 2015, calling it a “bailout” for insurers.

The action triggers the availability of the Ohio Life & Health Insurance Guaranty Association, which companies in the life and health insurance business in the state contribute to, according to the release. If InHealth's reserves and premium payments are insufficient to operate, the guaranty association supports up to $500,000 of a policyholder's claims, it said.

Rep. Pat Tiberi (R-Ohio), chairman of the House Ways and Means Subcommittee on Health, issued a statement saying that the CO-OP's failure is “unacceptable. My constituents deserve continuity, not plans that crumble and implode under their own weight.”

Tiberi said that in the coming weeks the House Republican Conference Health Care Reform Task Force will release “our agenda for an innovative and free-market approach for high quality and more affordable care.”

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

For More Information

The release on the failure of Coordinated Health Mutual is at https://www.insurance.ohio.gov/Newsroom/Pages/05262016InHealth.aspx.

InHealth's board resolution is at http://src.bna.com/foa.