Health Republic Closing Doors for Individual Policies

Health Republic Closing Doors for Individual Policies

(Report from Bloomberg) Health Republic Insurance of New York, the Affordable Care Act insurer that got $265 million in U.S. loans, will stop selling policies and eventually cease operations under orders from New York and federal regulators.

The insurer will be wound down because regulators found that it was likely to become financially insolvent, according to an e-mailed statement Friday from New York’s Department of Financial Services. The decision was made jointly by DFS, New York’s health-insurance marketplace and the federal Centers for Medicare & Medicaid Services.

“Given Health Republic’s financial situation, commencing an orderly wind down process before the upcoming open enrollment period is the best course of action,” Anthony Albanese, New York’s acting superintendent of financial services, said in the e-mail. Sixteen other insurers will sell health coverage on New York’s ACA marketplace this year, according to the statement.

Health Republic, the No. 2 provider of health coverage to individuals on the state’s Affordable Care Act marketplace, is the latest insurer created under the ACA to face financial trouble. The 2010 law helped create the nonprofit co-ops to increase competition as millions of new customers went shopping for health insurance with U.S. subsidies.

“At some point in time, the co-ops have to turn around their core business,” said Deep Banerjee, an analyst at Standard & Poor’s. “Unless they’re able to turn around their core business, they won’t be able to generate capital.”

Kelly Crowe, CEO of the National Alliance of State Health CO-OPs said in a statement that “from practically their inception, health insurance CO-OPs have been hamstrung by both the structure of the program and the way in which the Affordable Care Act was implemented. Though it has become clear that initial capitalization levels for most CO-OPs were insufficient for the short term, regulatory obstacles have continued to make it virtually impossible for these CO-OPs to raise additional third party capital to support growth.”

Health Republic received $265 million of U.S. loans. It’s too soon to say how much, exactly, the company will be able to pay back, because it’s still taking in premiums and paying claims, but it’s unlikely that it will repay the full sum, Banerjee said.

Typically, insurers pay back doctors and hospitals before lenders. The company is also waiting to get funds it’s owed from the U.S. government under programs designed to help insurers selling coverage in the ACA’s first years, said Michael Fagan, Health Republic’s chief government relations and communications officer.