Health Republic Insurance of New York sent brokers a notice on Friday that it is not honoring small-group policy renewals for Nov. 1 and Dec. 1. That sudden action will leave clients scrambling to find alternative health coverage.
Health Republic was ordered to wind down its operations in late September by state and federal insurance regulators. The state regulator, the Department of Financial Services, had to make a decision about policies that were about to expire, and the policyholders had already notified Health Republic in writing of their intent to renew.
On Oct. 9, William Friedman, the insurer's senior vice president of commercial sales, e-mailed brokers with the news that DFS told Health Republic "we cannot renew small-group policies with Nov. 1 and Dec. 1 renewal dates. This means that those groups' current health insurance policy with Health Republic will not renew and will end at midnight the day before those groups' scheduled renewal date (i.e., midnight on 10/31 for 11/1 renewal)."
The language of the termination letters is online here.
A spokesman for DFS said "we certainly understand that this provides relatively shorter notice for this particular segment of consumers, but we believe that given the company's financial condition, allowing the company to write new business isn't in the interest of consumers overall. That's the broader public policy reason for this particular approach."
According to New York state law, insurers must give small-group policy holders 30 days' written notice for nonrenewals. But the state's insurance regulator may be invoking powers outside that notification law.
DFS has statutory authority to protect consumers. Health Republic isn't in receivership, which triggers certain powers. But it is nearly broke. Had DFS allowed the renewals to proceed, small businesses could have paid for services Health Republic couldn't deliver. Hospitals and doctors also might have been stiffed.
The Medical Society of the State of New York, for example, warned its members that patients "may not continue to pay their premiums for a product they may consider defunct. If the patient has not paid their premium, Health Republic will not pay their claims."
Doctors also should be concerned whether Health Republic "will have adequate funds to reimburse physicians for professional services they have rendered," warned MSSNY.
Hospitals also analyzed the contractual implications of Health Republic's demise. A trade group, the Greater New York Hospital Association, e-mailed its members that DFS is conducting an "audit to determine whether the insurer has sufficient funds to operate and continue paying provider claims through the end of each employer's contract period. DFS could require Health Republic to terminate all small-group enrollment on a certain date."
If DFS terminates small-group policies before renewal, said GNYHA, that would make consumers "subject to new annual deductibles, losing any credit for health care expenses already incurred."