Health Republic NJ Shutting Down

by | Sep 13, 2016 | Health Care Reform, Health Exchanges, Obamacare, regional health insurance co-ops, State Exchanges

HRNJ Co-Op closing Down

Health Republic NJ Shutting Down

HRNJ Co-Op closing Down

Health Republic NJ Shutting Down

 

In yesterday’s surprise announcement, NJ regulators will be shutting down  Health republic NJ for 2017 “because of its hazardous financial condition”.  This marks the demise of the second Metro area healthcare co-op with the same name-sake Health Republic but different managed healthcare co-op, see Health Republic NY Shutting Down Nov 30.

Since Obamacare’s rollout in the fall of 2013, 16 co-ops that launched with money from the federal government have collapsed. Now, just six co-ops—Wisconsin’s Common Ground Healthcare Cooperative; Maryland’s Evergreen Health Cooperative; Maine Community Health Options; Massachusetts’ Minuteman Health; Montana Health Cooperative; and New Mexico Health Connections—remain.

In a bizarre twist of fate or unintended Affordable Care Act design flaw small affordable startups not only have to gain new client footholds but also support large Obamacare Failed Co-Opsestablished companies “with sicker patients”. Start-ups, by contrast, with much lower rate of diagnosed sick patients essentially pay into this tax. This tax is part of the risk adjustment program intended to stabilize Insurers who took on sicker patients and spread this risk.  While some correctly blame too low pricing and some miscalculated business decision-making the inherent extra tax doomed the majority of the original 16 co-ops.
Health Republic in fact grew steadily and made money the first 9 months of 2015.  However, HRNJ lost 17.6 million end of 2015 and is choking off at this $46.3 million payment to the government through the risk adjustment program.  This is considered one of the 3 R’s of the reinsurance program – risk corridor, reinsurance and risk adjustment that were intended to level the playing field. The first “R”—“reinsurance”—subsidizes insurers that attract individual customers who rack up particularly high medical bills. The second—“risk adjustment”—requires insurers with low-cost patients to make payments to plans that share the benefits with those who insured higher-cost ones. And the third, called “risk corridors,” is a program to subsidize health plans whose total medical expenses for all their Obamacare customers overshoot a target amount.
 The co-ops received less money than they initially anticipated last year under Obamacare’s risk corridor program, which resulted in the collapse of at least five co-ops and a $5 billion class action lawsuit filed by 6 state’s co-ops – ” Oregon-based insurer Moda Health Plan Inc., Blue Cross Blue Shield of North Carolina, Pittsburgh-based Highmark Inc., and the failed CoOportunity Health, which was based in West Des Moines, Iowa, and Health Republic Insurance Co. of Oregon, which was based in Lake Oswego.”

From Politico’s “Obamacare’s sinking safety net”:

 “The risk corridor program, however, has been an unmitigated debacle. In December 2014, the Republican Congress voted to prohibit the Obama administration from spending any money on the program, decrying it as a bailout for the insurance companies. Sen. Marco Rubio, then thought to be a leading GOP presidential contender for 2016, was particularly vocal in pillorying the program.

Unlike all those symbolic “repeal Obamacare” votes, Congress actually succeeded in blocking those risk corridor payments, and it hit Obamacare hard. Insurers filed claims seeking $2.9 billion, but under the limits imposed by the GOP there was less than $400 million available to make good on those payments. The end result: insurers initially received only 12.6 cents for each dollar they had counted on. Many of the new Obamacare co-op plans that went out of business blamed their collapse in part on the fact that they’d been counting on the full payments to keep them solvent.”

Regrettably, in a Presidential year no one wants to touch this burning hot potato. Perhaps NJ’s handling of this pressure cooker and taking 2017 off may be the best course of action after all.

 

9/16/16 Addendum:

As of Monday, September 19, 2016, the portal for Health Republic Insurance will be shut down, as they are no longer accepting new business for the year.

The New Jersey State Department of Banking and Insurance has also provided a list of FAQs related to the shutdown and how it affects individuals, small employers, brokers and providers. For more information, click here.

As always, our team is here to assist you and to help you grow your business.

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