Oregon Regulators Put CO-OP Into Receivership

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By Paul Shukovsky

July 11 — Oregon regulators said they will take Oregon's Health CO-OP into receivership July 11, citing excessive operating losses and an unexpected payment required by the federal risk adjustment program.

The failure of the latest Consumer Oriented and Operated Plan (CO–OP)—which leaves some 20,600 policy holders scrambling for new coverage by the end of the month—was quickly seized upon by the House Energy and Commerce Committee. “The announcement means that 15 out of the original 23 Obamacare CO-OPs have closed their doors,” a July 11 committee press release said.

“The CO-OPs are going down faster than the Titanic, yet there is not enough urgency coming out of the Obama administration to protect taxpayers dollars,” committee Chairman Fred Upton (R-Mich.) said.

The Oregon Department of Consumer and Business Services, in a July 8 order of immediate supervision, said OHC had a net operating loss of $17.2 million. That loss was driven mostly by medical claims for individual policies, the department said July 8.

‘With Great Sadness.'

On June 30, the Centers for Medicare & Medicaid Services announced decisions for its risk adjustment program and the news was not good for OHC. Instead of the CO-OP getting the $4.2 million it expected, the CMS required OHC to pay $913,948 for the 2015 Risk Adjustment Benefit year. That amounted to about a $5.1 million shortfall from what the company anticipated receiving in its Dec. 31, 2015 annual statement, the supervision order said.

OHC CEO Phil Jackson cited the risk adjustment shortfall at the top of a July 8 blog announcing that it would go into receivership. He said the CMS decision “was not favorable, not only for the CO-OP but for many other health insurance carriers across the nation. This combined with the high medical loss ratios experienced in the previous months made it clear it was no longer feasible for the CO-OP to continue to operate. It is with great sadness that I announce Oregon’s Health CO-OP is shutting down its doors immediately.”

State regulators and their consultants were in OHC corporate offices Monday preparing to take over operation of the CO-OP and ensure continued coverage through July, spokeswoman Lisa Morawski told Bloomberg BNA July 11. Phil Jackson, reached by e-mail through an intermediary, did not otherwise respond to a Bloomberg BNA request for an interview, telling the intermediary that he was not sure if he could speak to the press given the imminent receivership status of his company.

HealthyCT, a Connecticut CO-OP, was put under supervision last week. And like it's Oregon counterpart, HealthyCT was financially wounded by the CMS risk adjustment decisions, which in its case required a payment of $13.4 million. It's 40,000 policy holders have until the end of the year to find new coverage.

‘It Just Doesn't Make Sense.'

Oregon was the only state with two CO-OPS; it now has none. OHC was predeceased last year with the decision of Health Republic Insurance Co. to exit the market after learning that the CMS would pay it some $20 million less than anticipated under the risk corridor program.

Health Republic CEO Dawn Bonder told Bloomberg BNA July 11 that she is “perplexed” as to how OHC ended up owing more than $900,000 to CMS. “I would have expected them to potentially owe some money to the risk adjustment program on the small group side, but to actually have quite a large payout from the program on the individual side given the size and cost of their individual membership to the plan.”

“We have lost a lot of companies from the market due to these programs not functioning as the policy intended for them to function,” Bonder said. “Logically, it just doesn't make sense” for companies to owe so much money to programs that were meant to stabilize the new ACA marketplace.

“I don't feel we're getting anyone's attention at the federal level as to why we are getting these unintended outcomes,” Bonder said.

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The Order of Immediate Supervision is at http://src.bna.com/gFG.

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