New Jersey's insurance regulator on Monday shut down the state's co-op insurer because of its deteriorating financial conditions, marking the demise of yet another Affordable Care Act insurer.
Health Republic Insurance of New Jersey will be placed in rehabilitation, which will allow current customers to continue to use their health insurance policies through the end of 2016. New Jersey's Department of Banking and Insurance said the co-op will advise clients on their 2017 insurance options.
Only six of the initial 23 co-ops remain in business.
Like many of its cohorts, HRINJ ran into trouble when it was hit with a massive ACA risk adjustment payment that disrupted its finances. HRINJ was expected to pay $46.3 million because its customers were seemingly healthier than other insurers' bases. Co-ops have alleged the risk adjustment model is flawed and is weighed in favor of larger insurers, since smaller customer bases will look healthier with less claims data.
“Despite our hard work and growing customer base, the unfortunate necessity for complying with the ACA's risk adjustment mandate has put the company under considerable financial strain,” said Tom Dwyer, interim CEO of HRINJ.
The co-op has 26,000 individual policyholders and 9,000 members on small employer health plans, according to New Jersey regulators. It has approximately a 7% share of New Jersey's individual coverage and 2.1% share of the small employer health insurance business.
The CMS has yet to make changes to the risk adjustment model for co-ops, though it has said that it will address the issue. Lawmakers in the House Ways and Means Committee last week approved a bill that exempts former co-op customers from the coverage mandate if they lost health insurance coverage when their co-op failed.