Connecticut's co-op insurer HealthyCT is winding down its business after it was hit with a massive Affordable Care Act risk-adjustment charge, as the state's insurance regulator said the plan was financially unstable due to the required payments.
The Connecticut Insurance Department placed HealthyCT under an order of supervision (PDF) on Tuesday, preventing the insurer from writing new business or renewing existing policies with its customers. HealthyCT provides insurance for 40,000 people in the state, with 13,000 on individual plans and 27,000 members on employer plans.
The move comes less than a week after the CMS said HealthyCT owed $13.4 million in risk-adjustment obligations. The CMS' permanent risk-adjustment program is supposed to spread insurance risk among all ACA insurers and prevent companies from covering only the healthiest members.
“It became evident that this risk adjustment mandate would put the company under significant financial strain,” said Katharine L. Wade, Connecticut's insurance commissioner. “This order of supervision provides for an orderly run-off of the company's claim payment under close regulatory oversight.”
Some companies have voiced concerns that the current risk-adjustment model favors larger insurers, and smaller insurers are disadvantaged because their membership bases look healthier due to a lack of claims data.
The CMS has said it will make changes, but those moves aren't coming soon enough for some. Wade previously met with HHS Secretary Sylvia Mathews Burwell to push for a new risk adjustment formula, but the CMS refused to change the program for 2017. The state insurance department also said that HealthyCT's situation stemmed from the feds' decision to withhold risk corridor payments.
Founded in 2011, HealthyCT lost $28 million in the exchanges in 2014 and $9.5 million in the first half of 2015. HealthyCT members will still be covered by their current plans, but the co-op cannot renew individual or employer plans going forward.
The Connecticut Insurance Department maintained that other insurers in the state will be able to absorb HealthyCT's customers without incurring financial stress.
But the Connecticut Health Foundation said it was concerned that there is too much uncertainty in the transition plan, which could negatively impact consumers.
“We know that sometimes people fall between the cracks and end up uninsured or with gaps in their coverage, which nobody wants to happen,” said Elizabeth Krause, vice president of policy and communications at the Connecticut Health Foundation. “It is very important to be mindful of consumer health insurance literacy -- that is, to explain this change so that consumers understand what is happening and what they need to do to stay covered in a different plan that is affordable and high quality.”
Other co-ops were hit with big risk-adjustment obligations last week. Land of Lincoln Health in Illinois owes $31.8 million and New Mexico Health Connections owes $14.6 million.
The charges come as many insurers are already down. Land of Lincoln, for example, lost $90.8 million in 2015, and reported another more than $17 million in losses through May 31.
In all, only nine co-ops remain in business out of the 23 that sprang up under the ACA.
