Land of Lincoln Health, an Obamacare insurer that launched three years ago to bring competition to the online exchange, is liquidating amid big financial losses.
Dennis O'Sullivan, a spokesman for the Chicago-based startup, confirmed the insurer's closure.
“It's unfortunate for the members and for competition,” O'Sullivan said.
Anne Melissa Dowling, acting director of the Illinois Department of Insurance, has asked Illinois Attorney General Lisa Madigan to petition the Circuit Court of Cook County to start the liquidation process.
In a statement, Dowling said her decision was based on Land of Lincoln's financial position after the federal Centers for Medicare & Medicaid Services, or CMS, which oversees the exchange where Illinois consumers buy health policies, rejected a plan that would have stopped the nonprofit co-op from having to pay $31.8 million it owes as part of a federal program called risk adjustment.
Risk adjustment is one of three programs, known as the Three R's (risk corridor, risk adjustment and reinsurance), that intended to level the playing field among carriers that took on the risk of selling health plans on the Obamacare exchange, HealthCare.gov.
“LLH will temporarily continue to operate under the director's supervision” if the circuit court enters what's called an order of rehabilitation, the statement from the state Insurance Department said. Dowling then would work with CMS to hold a 60-day enrollment period for people with a Land of Lincoln Health policy to find a new plan from a different insurer on the exchange.
A spokesman for CMS declined to comment.
Land of Lincoln was among nearly two dozen co-ops born out of the Affordable Care Act to make the Obamacare exchange more competitive and to lower prices for consumers and small businesses. In Illinois, it was championed by small-business owners looking for an alternative to the bigger legacy insurers.
But co-ops across the country faced big hurdles against the larger, more established insurers with deeper pockets as they all vied for customers who ended up being sicker than projected. More than half of the co-ops nationwide folded as their financial losses mounted.
Land of Lincoln, which has nearly 50,000 members, lost $90.8 million in 2015 and reported more than $17 million in losses through May 31. It's biggest competitor was Blue Cross & Blue Shield of Illinois, which dominated the online marketplace and is the largest insurer in Illinois.
Earlier this month, Illinois insurance regulators tried to save Land of Lincoln by telling it to stop renewing policies for small and large businesses, stop selling new plans and to not make the nearly $32 million risk adjustment payment.
In that program, the federal government takes money from insurers whose enrollees on the public health exchange are considered low risk and ideally don't cost much, and gives it to insurers with higher-risk enrollees.
That order came on the heels of Land of Lincoln suing the federal government for nearly $73 million. That's how much the carrier claimed it was owed as part of the federal risk corridor program.
O'Sullivan, the Land of Lincoln spokesman, said the co-op's president and interim CEO, Jason Montrie, stressed that the efforts of the startup's board of directors and employees have been “significant.”
The co-op will continue paying policyholders' claims while working with state insurance regulators to prepare for liquidation.
"Illinois Obamacare plan to fold after 3-year run" originally appeared in Crain's Chicago Business.