Oregon insurer Health Republic to shut down in 2016, cites $20 million federal hit

An Oregon insurer, Health Republic, has announced plans to pull its health plans from the 2016 market and shut down, saying recent federal and state regulatory decisions put its financial health in jeopardy.

The plan was one of 23 nonprofit consumer-owned and operated startups founded with federal loans across the country in 2014, an aspect of the Patient Protection and Affordable Care Act intended to increase competition. Already, seven other co-ops are folding - including a second one announced Friday in Colorado.

The insurer plans to pay its more than 10,000 members' claims this year but not sell plans for next year, CEO Dawn Bonder said. She said the company wants to begin an orderly wind-down to "make sure that we can pay the obligations we've incurred from 2015 and not leave people hanging."

The move was sparked by the recent news that the federal government was paying less than 13 cents on the dollar of an expected subsidy to help cover costs for insurers hit hard by claims. The decision will cost Health Republic $20 million between 2014 and 2015.

"We have to be sure that we have the capital to go forward and at this point in time I don't think we do," Bonder said.

Just weeks ago Bonder had reassured members that the firm's finances were healthy. Three things have happened to change that, she said.

The first has to do with the "risk corridor" program that the federal government recently announced would pay far less than insurers had been expecting. While Health Republic was prepared to deal with the effects on its 2014 finances, it is looking increasingly likely that regulators will not allow insurers to count on any of those funds in 2015 either, Bonder said.

Other bad news came with the Oregon Insurance Division's announcement Thursday that the small group employer-based market would not be expanded as planned to include businesses of up to 100 employees. Health Republic had been counting on expanding its small group book of business.

On top of that, the rapid pace of failure of other nonprofit federal health insurer startups in recent weeks made Health Republic pessimistic about whether brokers would feel comfortable selling its 2016 policies.

The nonprofit qualified for federal startup loans of more than $50 million.

This post will be updated later today.

-- Nick Budnick
nbudnick@oregonian.com
503-294-5083
@nickbudnick

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