New York Considers Possible Solutions for Health Insurer Insolvencies
We recently wrote about the many failures of health insurance co-ops created under the Affordable Care Act (“ACA”), and the impact of those failures on providers and other creditors, consumers, and taxpayers.
As we described, nonprofit co-op insurers were intended to increase competition and provide less expensive coverage to consumers; however, low prices, lack of adequate government funding, restrictions on the use of federal loans for marketing, and low risk corridor payments from the Centers for Medicare & Medicaid Services created financial challenges for these insurance plans. Facing insolvency, state regulators have ordered many plans to cease offering coverage and be wound down.
In New York, the largest co-op established under the ACA, Health Republic Insurance Company of New York (“Health Republic”), was ordered shut down by New York State regulators in September 2015 because of its poor financial condition. Health Republic’s insolvency triggered a strong push by trade groups, legislators and other representatives for meaningful change in New York.
Various trade groups, including the Healthcare Association of New York State (“HANYS”) and the Greater New York Hospital Association (“GNYHA”), have been advocating for solutions, such as the establishment of a health insurance guarantee fund to protect consumers and providers in the event of a health insurer’s insolvency or liquidation. Presently, New York is the only state that does not have an insurance guaranty fund. In other states, guaranty funds have been effective in protecting consumers and providers when co-op plans have failed. Others proposed remedies include state funding of shortfalls through the budget process and reform of the insurance rate approval process.
On January 6, 2016, the New York State Senate conducted a hearing regarding Health Republic’s demise. The Senators hosting the hearing sought to determine, among other things, whether new regulations, such as those with respect to rate setting, could prevent future insurer failures.
Recently, New York State Senate Health Committee Vice Chair David Valesky (D-Syracuse) introduced legislation that would establish a guaranty fund, financed by a temporary one-time assessment on the state’s health insurers, to reimburse doctors and hospitals if a health plan becomes insolvent. Health insurers would be barred from passing along the cost of the assessment to policyholders. The bill is supported by HANYS and GNYHA. The insurance industry, in contrast, opposes the bill. [reported in Crain’s Health Plus Feb. 4 and here]