Sub for more: http://nnn.is/the_new_media | Toni-Anne Barry for ATR reports Sixteen Obamacare co-ops have now failed. Illinois announced that Land of Lincoln Health, a taxpayer funded Obamacare co-op, would close its doors, leaving 49,000 without insurance.
Ken Sullivan bought health insurance for his family this year from Land of Lincoln Health, a small, nonprofit company in Chicago.
The 52-year-old Chicagoan knew the purchase was a risk because the three-year-old insurer was struggling financially. But he said he didn’t have much choice after Blue Cross and Blue Shield of Illinois eliminated his plan last year and its alternative didn’t include any of his family’s doctors and hospitals.
Now his worst fears have come true.
The Illinois Insurance Department moved Tuesday to shut down Land of Lincoln because of its unstable financial health, leaving about 49,000 policyholders in a lurch. They will lose coverage in the coming months, but neither regulators nor the company have said exactly when.
Policyholders will be able to buy insurance from a different carrier to cover them for the rest of 2016, according to the state Insurance Department. But switching plans is going to cost them.
The co-pays and deductibles enrollees have been paying since January will not transfer to new plans. A new plan will reset deductibles and out-of-pocket maximums paid by consumers.
“This could be very disruptive for people who either liked Land of Lincoln’s provider network or had met their deductible and other out-of-pocket limits,” said Stephani Becker, a health-care policy analyst at the Chicago-based Sargent Shriver National Center on Poverty Law.
Beyond the impact on consumers, the demise of Land of Lincoln is a significant setback for the Affordable Care Act in Illinois. The insurer was one of 23 nonprofit cooperatives nationwide created under the federal health law to provide cost-effective coverage and competition in state insurance markets. With Land of Lincoln’s failure, the list of co-ops has shrunk to seven.
Just last week, Connecticut took control of its health insurance co-op, but policyholders will have coverage until the end of the year, avoiding the disruption that is coming to Illinois, disruption that Illinois’ top insurance regulator warned the federal government about two weeks ago.
After a slow start in 2014, Land of Lincoln grew rapidly last year, finishing 2015 with more than 35,000 individual policyholders and about 15,000 members in small and large employer plans. The co-op captured about 6 percent of the individual market in Illinois, which was good for second place but well behind Blue Cross’ 83 percent market share.
But Land of Lincoln lost more than $90 million in 2015, as the premiums it collected fell well short of the health-care costs of its enrollees. The shortfall in premium revenue was a problem also experienced by large, established insurers like Blue Cross that also participated in the restructured individual markets.
One of the aims of the health-care law was to provide coverage to people who couldn’t afford it or were denied insurance because of pre-existing medical conditions. The newly insured were sicker than carriers had expected.
Shortfalls in anticipated levels of federal funding also put Land of Lincoln in a bind. While big insurers have the financial reserves to cushion against losses, Land of Lincoln was in a precarious condition at the end of last year. Still, Illinois insurance regulators allowed the company to sell plans for 2016 to consumers.
The company has continued to lose money this year, even after increasing rates by an average of 29.7 percent. Through May, the co-op lost more than $17 million, according to the state Insurance Department.
The final blow came a few weeks ago when the co-op received a $31.8 million bill from the federal government. The company owed that amount to other insurers under a complex formula in the Affordable Care Act, which aims to keep premiums stable by balancing risks among insurers. The company couldn’t afford to pay the bill.
Acting Insurance Director Anne Melissa Dowling tried to intercede on the company’s behalf by suspending the payment until the co-op received more than $70 million in promised federal assistance.
Dowling, in a June 30 letter to federal regulators, said the payment suspension was necessary, otherwise she would have to liquidate the company mid-year, a process that would “trigger marketplace disruption and extreme financial harm” to policyholders.
But federal regulators didn’t go along with the last-ditch effort and Dowling began an orderly wind down of company operations to protect remaining assets for policyholders and providers.
Land of Lincoln is the latest casualty in the health-care law co-op program. According to Americans for Tax Reform, the company is the 16th co-op to fail. The federal government financed co-ops with low-interest loans totaling $2.4 billion. In Illinois, the Metropolitan Chicago Healthcare Council, a hospital trade association, received $160 million in funding to start Land of Lincoln.
The company’s collapse will hit hospitals and physicians throughout Illinois. The company had nearly $49 million in unpaid claims at the end of the first quarter.
Policyholder Cheryl Mostowski said the demise of Land of Lincoln has left her feeling discouraged and frustrated. She sees specialists at the University of Chicago to treat her autoimmune disease. She has already met the $1,350 deductible on her 2016 plan and nearly reached her $3,200 out-of-pocket maximum.
“The fact that I now have to pay all deductibles and out-of-pocket costs again is truly unaffordable and unfair,” said Mostowski, who lives in Algonquin.
Becker said she and other consumer advocates in the state have reached out to the Department of Insurance to see if regulators would consider allowing policyholders to transition to new plans without resetting their deductibles and other out-of-pocket payments.
In the meantime, Becker advised policyholders to keep paying their premiums to maintain their coverage.
Michael Batkins, a department spokesman, said Dowling was unavailable for comment Wednesday. Land of Lincoln spokesman Dennis O’Sullivan referred all policyholder-related questions to the state Insurance Department.
Sullivan is waiting to hear what next steps he should take. The self-employed bond trader is worried that there will be gaps in the continuity of care when he switches to a new insurer. He’s also concerned his family’s doctors won’t be in-network with other plans.
“My family has decades-old relationships with physicians and specialists, which now may be severed,” Sullivan said. “I live about two blocks from Northwestern Memorial Hospital and it may be off limits in the near future.”
Posted by Alexander Hendrie on Thursday, July 7th, 2016, 9:53 AM
The Obama administration has been illegally funding Obamacare “Cost Sharing Reduction” (CSR) payments for years over the objections of IRS officials, according to a report released today by the House Ways and Means Committee and the House Energy and Commerce Committee. Since Congress launched its investigation, multiple agencies have refused to provide information, selectively applied the law, and even pressured one witness not to testify.
-The administration initially submitted a CSR appropriations request for Fiscal Year 2014, but later withdrew it and began making payments illegally. As the report notes, Obamacare created CSR payments, but they have never been appropriated for. The Constitution explicitly makes clear that the power of the purse lies with Congress and the Executive cannot spend taxpayer money without Congressional approval.
-CSR payments were created as one way to artificially hide the true costs of Obamacare through a web of government spending programs. CSR payments would be given to an insurance company based on the income of an enrollee and the plan they purchased. Assuming certain criteria were met, the insurance company would receive federal dollars as an incentive to keep co-payments, deductibles, and other out of pocket costs low.
-After officials from the Obama Department of Health and Human Services (HHS) withdrew the CSR appropriations request, the administration begun illegally shifting funds from a separate appropriation. The administration has refused to provide the legal memorandum that led to this decision even in the face of Congressional subpoenas.
-IRS officials expressed concern that this method of funding CSR payments was illegal so were briefed on the memorandum. As the report notes in an interview with one IRS official at the meeting, they were not permitted to take notes or keep a copy of the memo:
“We were given a memo to read. We were instructed we were not to take notes and we would not be keeping the memo, we’d be giving it back at the end of the meeting.”
-Following this meeting, IRS officials continued to have concerns that the CSR payments violated federal law and raised concerns with IRS Chief John Koskinen. As the report notes, these concerns were heard, but ignored:
“The IRS officials’ concerns that this course of action violated appropriations law were noted, but not addressed or ameliorated by OMB’s legal memorandum.”
-Shortly thereafter, DoJ and Treasury officials officially approved the decision to use an unrelated appropriation to make CSR payments.
Since Congress launched its investigation, multiple Obama government agencies have undertaken a concerted effort to hide the truth by refusing to provide, or unlawfully redacting documents, refusing to answer questions or allow witnesses to testify, and selectively applying the law. In at least one case, the Obama administration pressured a witness into not revealing information, and in another case the administration prevented a witness from answering questions.
As the report notes:
- The Department of the Treasury improperly withheld and redacted documents without any valid legal basis to do so.
- The Department of Health and Human Services improperly withheld documents without any valid legal basis to do so.
- The Office of Management and Budget improperly withheld documents without any valid legal basis to do so.
- The Department of the Treasury failed to search for records responsive to the committees’ subpoenas.
- Treasury used regulations and Testimony Authorizations to prohibit current and former IRS employees from providing testimony to Congress about the source of funding for the CSR program.
- Treasury officials selectively enforced the law by allowing witnesses to answer certain questions prohibited by the authorizations without objection
- HHS counsel prevented witnesses from answering substantive questions regarding the CSR, citing the need to protect “internal deliberations” and “confidentiality interests”
- Witnesses were instructed not to reveal the names of White House and DoJ officials involved in decisions regarding the cost sharing reduction program.
- The Department of the Treasury pressured at least one witness into following the restrictions set forth in his Testimony Authorization after the witness questioned Treasury’s ability to limit his testimony.
- OMB prevented a witness from answering factual questions regarding the dates or times of a meeting or conversation, refusing to invoke a legal privilege to justify withholding the information from Congress.
Insurers helped cheerlead the creation of Obamacare, with plenty of encouragement – and pressure – from Democrats and the Obama administration. As long as the Affordable Care Act included an individual mandate that forced Americans to buy its product, insurers offered political cover for the government takeover of the individual-plan marketplaces. With the prospect of tens of millions of new customers forced into the market for comprehensive health-insurance plans, whether they needed that coverage or not, underwriters saw potential for a massive windfall of profits.
Six years later, those dreams have failed to materialize. Now some insurers want taxpayers to provide them the profits to which they feel entitled — not through superior products and services, but through lawsuits.
Earlier this month, Blue Cross Blue Shield of North Carolina joined a growing list of insurers suing the Department of Health and Human Services for more subsidies from the risk-corridor program. Congress set up the program to indemnify insurers who took losses in the first three years of Obamacare with funds generated from taxes on “excess profits” from some insurers. The point of the program was to allow insurers to use the first few years to grasp the utilization cycle and to scale premiums accordingly.
As with most of the ACA’s plans, this soon went awry. Utilization rates went off the charts, in large part because younger and healthier consumers balked at buying comprehensive coverage with deductibles so high as to guarantee that they would see no benefit from them. The predicted large windfall from “excess profit” taxes never materialized, but the losses requiring indemnification went far beyond expectations.
In response, HHS started shifting funds appropriated by Congress to the risk-corridor program, which would have resulted in an almost-unlimited bailout of the insurers. Senator Marco Rubio led a fight in Congress to bar use of any appropriated funds for risk-corridor subsidies, which the White House was forced to accept as part of a budget deal. As a result, HHS can only divvy up the revenues from taxes received through the ACA, and that leaves insurers holding the bag.
They now are suing HHS to recoup the promised subsidies, but HHS has its hands tied, and courts are highly unlikely to have authority to force Congress to appropriate more funds. In fact, the Centers for Medicare and Medicaid Services formally responded by telling insurers that they have no requirement to offer payment until the fall of 2017, at the end of the risk-corridor program.
That response highlights the existential issue for both insurers and Obamacare. The volatility and risk was supposed to have receded by now. After three full years of utilization and risk-pool management, ACA advocates insisted that the markets would stabilize, and premiums would come under control. Instead, premiums look set for another round of big hikes for the fourth year of the program.
Consumers seeking to comply with the individual mandate will see premiums increase on some plans from large insurers by as much as 30 percent in Oregon, 32 percent in New Mexico, 38 percent in Pennsylvania, and 65 percent in Georgia.
Thus far, insurers still claim to have confidence in the ACA model – at least, those who have not pulled out of their markets altogether. However, massive annual premium increases four years into the program demonstrate the instability and unpredictability of the Obamacare model, and a new study from Mercatus explains why.
The claims costs for qualified health plans (QHPs) within the Obamacare markets far outstripped those from non-QHP individual plan customers grandfathered on their existing plans – by 93 percent. They also outstripped costs in group QHP plans by 24 percent. In order to break even without reinsurance subsidies (separate from the risk-corridor indemnification funds), premiums would need to have been 31 percent higher on average for individual QHPs.
The main problem was that younger and healthier people opted out of the markets, skewing the risk pools toward consumers with much higher utilization rates – as Obamacare opponents predicted all along. With another round of sky-high premium increases coming, that problem will only get worse, the study predicts.
“[H]igher premiums will further reduce the attractiveness of individual QHPs to younger and healthier enrollees, resulting in a market that will appeal primarily to lower-income individuals who receive large subsidies and to people with expensive health conditions,” it concludes. “To avoid such an outcome, it is increasingly likely that the individual insurance market changes made by the ACA will have to be revised or reversed.”
Galen Institute senior fellow Doug Badger, one of the study’s co-authors, wonders how long insurers will continue to publicly support Obamacare. In an interview with me this week, Badger noted how critical that political cover is for the White House, but predicted it won’t last – because the system itself is unsustainable, and no one knows this more than the insurers themselves, even if they remain reluctant to voice that conclusion. Until they speak up, however, the Obama administration can keep up their happy talk while insurers quietly exit these markets, an act that should be speaking volumes all on its own.
Even the Kaiser Foundation, which has supported Obamacare, has admitted that the flood of red ink has become a major issue. “I don’t know if we’re at a point where it’s completely worrisome,” spokesperson Cynthia Cox told NPR, “but I think it does raise some red flags in pointing out that insurance companies need to be able to make a profit or at least cover their costs.”
Red flags have flown all over the Obamacare model for six years. Instead of suing the federal government for losses created by a system for which they bear more than a little responsibility, insurers should finally admit out loud that the ACA is anythingbut affordable – not for insurers, and certainly not for consumers or taxpayers. When that finally happens, we can then start working on a viable solution based on reality rather than fealty to a failed central-planning policy.