Health Republic Insurance of New York will close up shop by year-end, marking one of the biggest blows to the Affordable Care Act's co-op program to date.
Health Republic is the largest not-for-profit co-op in the country with approximately 200,000 members as of this past spring, or roughly one-fifth of all people enrolled in a co-op health plan. But like almost all of the other co-ops, which have been seeded with loans from the ACA, Health Republic was losing money after it attracted some of the sickest and costliest members in its market.
Records show Health Republic lost about $53 million in the first half of this year, compared with almost $78 million in losses in the first half of 2014. Health Republic received $265 million in federal loans. Congress gutted some of the co-op program's funding during the fiscal cliff debate of late 2012.
“While we are deeply disappointed with this outcome, we believe it is in the best interests of our members,” Health Republic said in a statement. “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 was raising its 2016 individual premium rates by 14.4%, the most of any New York insurer. The company was hoping to break even by the end of this year or next, CEO Debra Friedman said in a June interview. She spoke right after the Supreme Court ruled in favor of the Obama administration in the King v. Burwell case.
“It's a capital-intensive business,” Friedman said. “It does take multiple years to get to break-even.”
She viewed the King case as a galvanizing moment for co-ops, exchanging e-mails with other co-op CEOs who were “thrilled” the justices did not mess with the healthcare law's premium subsidies.
“Co-ops are a driving force in being disruptive in the market,” Friedman said. “The co-op program is sustainable.”
The ACA's third open-enrollment period begins Nov. 1, when Health Republic's members will have to select a new health plan on New York's exchange.
“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,” Anthony Albanese, acting superintendent of the New York Department of Financial Services, said in a news release.