Health Republic leaving Ore. market; experts not surprised

Health Republic Insurance, a nonprofit health insurance carrier, announced Friday that it will not offer small group or individual plans, on- or off-exchange in 2016.

It isn’t the only co-op closing this year, and experts like Patrick O’Keefe of Cascade Insurance Center are not surprised.

“It was a big hurdle for the co-ops to be successful and be sustainable to come into the market when they start out with zero members,” O’Keefe said Friday. “That’s a hard place to start out from.”

All current Health Republic individual and small group policies remain in full effect through the end of 2015. Members can continue to see plan providers and claims will be paid under plan terms.

As Oregonians are getting ready to sign up for health insurance in 2016 during the open enrollment period from Nov. 1 to Jan. 31, many will not like prices they have to pay.

“It’s going to be a difficult year this year,” O’Keefe said.

O’Keefe said individual insurance premiums are expected to go up between 20 and 50 percent in 2016. And while the Affordable Care Act plays a major factor in this, he said the reason behind the increase is more complicated than that.

“Rates have been going up for quite some time,” O’Keefe said. “Our system definitely has issues and we’ve been seeing 10 and 15 percent rate increases for many years.”

Some states, like New Jersey, have seen rates dropping. Why the difference? Nationwide, insurance companies had to estimate how much they were going to spend. In New Jersey, the estimates were right on track. In Oregon, companies underestimated their expenses.

“This is the first year that the carriers actually have over a year’s worth of data, their claims experience. to see what they’re working with — and it hasn’t been pretty,” O’Keefe said.

The rise in claims by people who had never been covered before was supposed to be partially paid for by the federal government, but the pay was far less than expected in subsidies. It meant a $20 million loss for Health Republic Insurance.

The federal government recently announced it would pay insurance companies only 12.6 percent of their risk corridor receivable for the 2014 plan year and has created industry-wide concern about when, or if the 2015 risk corridor would be paid.

“Since our inception in 2013, Health Republic designed and priced all our plans in reliance upon the risk sharing guarantees of the Affordable Care Act. The government’s refusal to honor its risk corridor obligations represents a negative financial impact of over $20 million,” said Health Republic president and CEO Dawn Bonder.

“This has placed us in a difficult financial position that could jeopardize our members and partners. As a result, we believe the most ethical step is for Health Republic to refrain from entering the market in 2016 and begin an orderly wind down of business.”

O’Keefe said there are many more changes needed to our health care system.

“The way we’ve been doing things over the last 10 years hasn’t been working,” O’Keefe said. “We’ve just been compounding increases every year without much changing.”

Health Republic will work with the Oregon Insurance Division to ensure a smooth transition for members, employers, providers, partners and staff. The company will pay all claims through 2015 and plans to fulfill all financial obligations.

Health Republic has offered individual and small group insurance statewide, on and off exchange, for 2014 and 2015. Currently, the plan serves nearly 15,000 members, including employees from over 800 small businesses in Oregon.

Health Republic advises all individual policy holders to shop for new plans when Open Enrollment begins Nov. 1.

For more information on this transition, visit: https://www.healthrepublicinsurance.org/

Co-ops were created as part of a compromise in the Affordable Care Act to compete with for-profit insurance companies.

The idea of risk corridors is to compensate insurance companies that end up with bigger costs than they expected. Under the law, they must sell policies equally to everyone, regardless of their medical history, so it’s possible some insurers could end up with an especially unhealthy pool of customers.

If an insurer’s actual claims in 2014 are at least 3% greater than the claims projected when the insurer set 2014 rates, the government must reimburse the insurer for half of the excess. If actual claims jump 8% beyond projected claims, the government covers 80% of the excess.

Federal officials say they’re counting on the program, which lasts through 2016, to forestall any nervousness among insurers about their initial customer base and prevent them from raising rates. They point to a similar plan put in place when Medicare was expanded last decade to include Part D coverage of prescription drugs.

Aaron Albright, spokesman for the Centers for Medicare and Medicaid Services, said, “CMS’ priority is to make sure that Marketplace customers have access to quality, affordable coverage through the Marketplace. We are working with Oregon officials to do everything possible to make sure consumers stay covered.”

Albright added, “We recognize that for Health Republic Insurance, a lower than expected 2014 risk corridor payment may have raised additional solvency concerns.”

He said risk corridors payments and charges are determined by a mathematical formula, which basically compares claims and premiums.

For 2014, the first year of the risk corridors program, payment requests by issuers exceeded their charges. Based on current data for 2014, the first year of the three-year risk corridors program, insurers will pay risk corridors charges of approximately $362 million, and insurers have requested $2.87 billion of risk corridors payments.

As a result, Albright said, “consistent with our guidance, insurers will be paid approximately 12.6% of their risk corridors payment requests at this time. Standard & Poor’s Ratings Services estimated a similar result earlier this year saying that “risk corridor payables are less than 10 percent of the receivables insurers reported in 2014.”

“On October 1, CMS recognized that for a limited number of insurers, a lower than expected 2014 risk corridor payment may raise solvency concerns. We immediately contacted those states and insurers and began working with them throughout this process.”

Unlike traditional health insurance companies, Health Republic is a 501(c)(29) private non-profit governed by its members, and by law must reinvest all profits back to its programs, including providing better care and lower costs for members. Health Republic provides access to health care in all parts of Oregon through the statewide Providence Network. This partnership offers members an extensive group of providers, practitioners, and facilities, including 60 hospitals and thousands of providers, labs, imaging locations and physician clinics throughout Oregon and SW Washington.