Troubled nonprofit insurer Colorado HealthOP on Monday sued for the right to continue selling policies in 2016 as it explored solutions to its financial problems.
But at the eleventh hour — and after a closed-door court hearing from which reporters were removed — the low-cost insurer said it will begin shutting down.
HealthOP filed a request in Denver District Court seeking to reverse a decision by state regulators to remove the co-op from Connect for Health Colorado, the state health-insurance exchange.
“All I can say is that we will work with the Division of Insurance to wind down the company,” Colorado HealthOP CEO Julia Hutchins wrote in a text message to The Denver Post after the hearing. “There will be no further hearings. And no further comments from me.”
A hearing had been scheduled for Tuesday morning.
Colorado HealthOP was dropped from the insurance marketplace because the low-cost insurer did not meet state capital-reserve requirements,
the Colorado Division of Insurance said Friday.
Without the ability to sell new policies, the cooperative is out of business.
The Division of Insurance declined to comment Monday.
Colorado HealthOP warned this month that its financial condition was precarious because its 2014 “risk corridor” reimbursement under the Affordable Care Act was $14 million lower than expected. The risk corridor was one of three mechanisms under the ACA designed to help insurers take on sicker, more expensive members who would enroll under a health exchange.
Concerned that the cooperative’s reserves would be negatively affected by the 2014 shortfall and the uncertainty of 2015 reimbursements, state regulators determined that the insurer would not be financially stable enough to continue.
The decision resulted in nearly 83,000 members find new individual and small-group insurance coverage and left about $72 million in federal low-interest solvency and startup loans outstanding, Hutchins said.
So long as customers continue to pay premiums, their policies will remain in force. HealthOP will continue to pay claims, Hutchins said Friday.
In the Monday court filings, HealthOP said it hoped to resolve its insolvency in a merger with another state insurance co-op, a loan from a reinsurance company or an infusion of private venture capital.
The risk-corridors program required insurers on the exchanges to pay into the program if their premiums exceeded claims and for those whose claims were more expensive than expected to receive federal reimbursement. However, an appropriations bill passed late last year by the Republican-led Congress required the program to be “budget neutral,” meaning that the U.S. Department of Health and Human Services could not draw from other sources to cover shortages.
“This certainly is a problem that was brought on through Congress and through the administration and them not fulfilling their promises to put the protections in place,” Hutchins said early Monday.
In 2014, insurers paid about $362 million into the program and requested reimbursements exceeded $2.8 billion. HealthOP is the seventh co-op in the nation to collapse. Similar nonprofit insurers have failed in Kentucky, Louisiana, Iowa/Nebraska, Nevada, New York and Tennessee.
Only one out of 23 insurance cooperatives— a co-op in Maine — made money last year, according to a July report from the U.S. Health and Human Services inspector general’s office.
“Most of the co-ops have not been collecting enough money to cover their financial obligations,” said Scott Harrington, professor and Health Care Management department chair at the Wharton School of the University of Pennsylvania.
The low premiums and skyrocketing member bases of co-ops like Colorado HealthOP further dampened that financial picture.
“The worst thing that can happen to any insurance company is to grow very rapidly at inadequate premiums,” Harrington said.
Backed by federal loans, HealthOP was able to build market share with its cut-rate premiums
, said Michele Lueck, CEO of Colorado Health Institute, a nonprofit policy research group. HealthOP, for some customers, was the lowest-cost provider, driving rates down for other carriers.
“They have to come back up at some point,” she said.
Preliminary rates for individual medical plans proposed by Colorado HealthOP showed an overall increase of 21.6 percent for 2016, according to Colorado Division of Insurance data. Other carriers anticipated individual health plan premium increases ranging from 2 percent by Kaiser to 34.4 percent by Rocky Mountain HMO.
The final rates are expected to be released before Nov. 1, when open enrollment begins.
Staff writer Aldo Svaldi and The Associated Press contributed to this report.
Alicia Wallace: 303- 954-1939, awallace@ denverpost.com or @aliciawallace
