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Health Plan Closure Not Unique To Kentucky

Ja'Nel Johnson

Julia Nazarenko has been insured through the Kentucky Health Cooperative since 2013.

She said she was relieved to have health coverage since her earnings as a waitress and part-time English teacher didn't allow her to afford health insurance through either of her two jobs.

"If I got sick I would be able to go to the doctor, and I would just be able to focus on getting better and getting my medication instead of having to debate: Do I try to get better on my own rather than spending possibly more money than I have at the doctor's office," Nazarenko said.

Now, the 25-year-old has to look for health insurance elsewhere. That's because the co-op is closing at the end of the year.

The nonprofit organization that has provided health insurance to members since 2013 on Friday quietly announced its plans to close. It is the largest provider of private health insurance plans through the state health insurance marketplace, Kynect.

The closing affects about 51,000 Kentuckians.

Carrie Banahan, executive director of Kynect, said although the insurer's finances had recently begun to improve, it was no longer able to offer plans in 2016.

"Based on some guidance that was recently issued by CMS concerning risk corridor payments, they were expecting to receive $77 million, but they only received a little over 12 percent of that," she said, referring to the Centers for Medicare and Medicaid Services.

This year, the agency plans to pay out significantly less in risk corridor payments — a system established under ACA in which insurers contribute to a federal fund they can then tap to cover financial losses due to higher-than-average usage among members or customers. CMS fell $2.5 billion short on the payments in 2015.

The Republican-led Congress has been hostile toward the ACA and the risk corridor provision, and it appears unlikely they would provide funds to cover the additional losses.

The Kentucky co-op earlier this year requested its second-straight rate increase of more than 20 percent, a sign of trouble.

"They were really the lowest-cost option on Kynect in 2014, and as a result they attracted a lot of the individuals who were higher risk," Banahan said of the Kentucky Health Cooperative. "As a result, their claims costs were higher than other insurance companies."

The closing of the co-op is not unique to Kentucky. CoOpportunity Health, which provided insurance in Iowa and Nebraska, closed in February. And Louisiana Health Cooperative, Nevada Health Co-Op and Health Republic Insurance of New York are also set to close by the end of the year.

A report by the Department of Health and Human Services shows Kentucky Health Cooperative estimated enrollment to be 30,929 by Dec. 31, 2014. In actuality, 56,680 people enrolled through the co-op.

The report stated that the members' claims exceeded its premium income.

The HHS also confirmed Banahan's explanation that more people with expensive health conditions enrolled in the co-op plans, while fewer-than-expected young and healthy people signed up. Another factor could have been inaccurate insurance premium pricing. The co-ops sought to promote competition on the new insurance marketplaces by offering low premiums.

Under the Affordable Care Act, CMS awarded loans to co-ops on the basis of their ability to become financially viable. But the department also found that many of them had lower-than-expected enrollment numbers and significant financial losses out of the gate.

Nazarenko is upset her policy will be canceled in the upcoming months. The co-op was sold as a low-cost health insurer managed by members and, as such, not subject to similar pressures as other commercial insurers.

She said she hopes she will still be able to qualify for Medicaid through another insurance provider. Otherwise, she fears she won't be able to afford the cost of health insurance.

"I might very well be facing the reality that I will once again be uninsured, which is frustrating," Nazarenko said. "But until I'm able to get a job that has health care benefits that are affordable, that may be a possibility. I just might have to be uninsured once again."

Banahan said Kentuckians currently enrolled with the co-op should expect a letter in the mail later this month advising them that their plan is no longer available in 2016. She said they will need to select a new plan by Dec. 15 to secure a Jan. 1, 2016, effective date.

The letter also will include a list of insurance providers in an individual's county. In 2016, seven insurers will offer plans through Kynect: Aetna, Anthem, Baptist Health, CareSource, Humana, United Healthcare and WellCare.

Kynect offered plans from five insurers last year. Kentuckians can browse available plans offered through the exchange beginning Oct. 16.

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