Health Republic Ceasing Operations

In a news release late Friday, September 25th, “Co-Op” health insurance company Health Republic reported that New York State and Federal authorities are requiring them to cease operations effective January 1st, 2016 (News Release). Citing the “structure of the co-op program” and the upcoming open enrollment period company officials, in conjunction with the New York State Department of Financial Services, made the decision to stop offering insurance policies.

All in-force individual policies will continue until the end of the year at which point subscribers will need to select a new insurance carrier and health plan. The best course of action regarding Health Republic’s small group customers is being evaluated and a determination of action is promised soon. If the insurer is forced to stop paying claims on January 1st, 2016 non-calendar year, in-force policies may present the need for some small groups to renew early.

Health Republic is one of several non-profit co-ops offering health insurance in the U.S. who were provided low interest loans through the Affordable Care Act and are now struggling to establish a foothold. Previous KBM blog posts described Health Republics low premiums compared to their competitors, impending loan repayments and weak provider network; all factors that may have led to the carrier’s demise.

Offering health plans with premiums 30% lower than your competitors is great for sales, but “insurance” requires a balance between revenue (premium) and expense (claims + administration). We predict the $265 million loan Health Republic (formally the Freelancers Insurance Company) received from the federal government will likely not be paid back.

An unfortunate outcome of this health plan closure is the effect it will have on Syracuse based claims administrator POMCO. The Eastwood company has been processing claims for Health Republic and created hundreds of new positions in recent years to handle Health Republics 200,000+ members. Health Republic was POMCOs largest client in terms of membership.

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