In December 2015, we wrote about the many failed health insurance cooperatives created under the Affordable Care Act (“ACA”) and about the impact of these failures on providers and other creditors, consumers, and taxpayers. . At that time, cooperatives across the country had more than a million members. As of January 2021, there were approximately 120,000 enrolled in three remaining cooperative plans. Nonprofit cooperative insurers were intended to increase competition and provide less expensive coverage to consumers. However, low prices, lack of adequate public funding, restrictions on the use of federal loans for marketing, and payments from the Centers for Medicare & Medicaid Services low-risk broker created financial challenges for these insurance plans.
New York Health Republic Insurance Company (“Health Republic”) was the largest cooperative established under the ACA. New York State regulators ordered the closure of Health Republic in September 2015 due to its poor financial situation. In Health Republic’s five-year and more liquidation proceedings, its external legal advisers and other professionals have received approximately $ 8 million, while no money has been distributed to providers or policyholders. Unlike certain other states that maintain health insurance guarantee funds to protect consumers and providers in the event of a health insurer’s insolvency, New York State did not have this guarantee fund to protect creditors. of Health Republic.
The ACA risk corridor program was designed to limit the profits and losses of cooperative plans during the first three years of operations by raising money from plans where costs were lower than the premiums received and, at the on the contrary, by paying those plans in which the costs exceed the premiums received. In practice, the losses from the plans outweighed their profits and the federal government only paid a small percentage of the risk broker’s payments because of the plans. Many lawsuits were filed for plans that sought to recover more than $ 12 billion from the government. After a lengthy litigation, the U.S. Supreme Court ruled on April 27, 2020 that the government was required to make full-risk broker payments.
According to a May 3, 2021 press release, the New York Superintendent of Financial Services announced an agreement with the federal government by which Health Republic will recover more than $ 220 million. This recovery will allow the Health Republic Settler to “pay all claims at the policyholder level, including many New York hospital systems and other health care providers,” as well as pay claims from New York State and local government. and a portion of the claims of the general creditors. Fortunately, the favorable outcome of the litigation on payments of the risk broker will provide the means for the recovery of creditors in this prolonged liquidation procedure.