Friday, October 9, 2015

Kentucky Health Cooperative, burdened by unhealthy policyholders and Congress's cuts in a subsidy, is closing

By Al Cross
Kentucky Health News

The Kentucky Health Cooperative, which sold 75 percent of the policies bought through the state health-insurance exchange, is going out of business because it lost so much money and Congress cut subsidies for insurers who would up with a costlier group of policyholders under the federal health-reform law.

Co-op officials said they were expecting $77 million from the federal government to cover past and expected losses, but got only $9.7 million. The co-op lost $50 million last year, the most of any of the 22 co-ops created with subsidies from the reform law.

Less money was available from the federal government because of a restriction that Republicans added to the omnibus spending bill last December.

That didn't keep Senate Majority Leader Mitch McConnell, R-Ky., from saying in a news release, “Barely a week goes by that we don’t see another harmful consequence of this poorly conceived, badly executed law. Despite repeated Obama administration bailout attempts, this is the latest in a string of broken promises with real consequences for the people of Kentucky who may now be losing the health insurance they had and liked, twice within the past three years because of Obamacare’s failures.”

The co-op said in a news release that it had reduced its losses to $4 million by the end of June. "We were on track to reverse direction and begin operating in the black, and we expected this to come about in 2016," said Glenn Jennings, who took over as CEO in June after Janie Miller resigned.

To cover losses, the co-op asked for and received an average rate increase of 20 percent for this year and 25 percent for the enrollment period that begins Nov. 1. But when the federal subsidy fell far short, the co-op had little choice but to close, said Joe Smith, its board chairman.

The press release from McConnell's office said the co-op had been "ordered" to close, but Smith said in an interview, "We did it voluntarily."

Spokeswoman Susan Dunlap said the co-op consulted with the state Department of Insurance and the federal Centers for Medicare and Medicaid Services about its future, "but I have never heard the word 'ordered' used." She said "Herculean and unrelenting efforts were made" to save the co-op.

State officials were largely mum on the matter. A call to Insurance Commissioner Sharon Clark was returned by an email from spokeswoman Ronda Sloan, who was asked if the department had advised the cooperative to shut down. She declined to comment further.

The cooperative said it will meet its financial obligations to the 52,000 people it insures. Smith said it was required to have a reserve five times its premium income to cover losses.

Co-op policyholders will have to find new insurers by Dec. 31, when their policies will expire. The enrollment period ends Jan. 31.

The co-op's demise was relegated to the eighth paragraph of a 19-paragraph press release from the state Cabinet for Health and Family Services, which touted the fact that more insurers than ever will be offering plans through Kynect, the state health insurance exchange.

Co-op officials blamed its troubles on the fact that it attracted too many unhealthy people and thus had to pay out much more than expected in claims.

"Many of our members had never had health insurance before," Jennings said in the release. "What happens when people don't have health insurance? They probably aren't looking after their health and well-being. They're probably not seeing providers. If they aren't seeing providers, they might not be aware that they have chronic conditions. Or, they might be dealing with something that's acute, but they didn't have the out-of-pocket funds to get treatment. All this adds up to a lot of people with pent-up medical needs."

Smith noted that the co-op was the only insurer to offer a "platinum" plan, the top level of coverage. He said that was ideal for people who had been in the state's high-risk pool, funded by a fee on all health-insurance policies, which is now used to fund Kynect. However, he said they were in the pool for a reason: they were high-risk. 
Smith said the co-op achieved its mission of promoting "community health and well-being by engaging its members and providers," insuring more than 50,000 people who hadn't had insurance, and hopefully offering competition that made other insurers' premiums lower. "We have kept the financial and health well-being of our members at the forefront," he said.

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