Half of the failed Obamacare health insurance co-ops are not covered by a 33-year-old guaranty program designed to protect consumers when an insurance company defaults, according to a Daily Caller News Foundation investigation.
The Guaranty Association program, an insurance program to protect consumers in the event of an insurance company default, was established in 1983. The program provides financial coverage to people who enroll in a health insurance program, and pays up to $500,000 in medical costs if an insurance company becomes insolvent.
But a source familiar with the highly guarded guaranty system told TheDCNF “about half of the co-ops are likely not to be guaranty member companies and thus not covered.”
If a co-op is not part of a state-managed guaranty program, only its liquid assets count as the source of available funds for medical expenses. There are no other sources to reimburse patients or care providers, such as doctors.
Fourteen Obamacare co-ops in 16 states have collapsed since their debut in 2013, costing $1.4 billion in federal funds and forcing more than 800,000 customers to seek health insurance coverage elsewhere.
TheDCNF has also learned that Health Republic of New York, the largest of the Obamacare co-ops, never qualified as a member of the New York guaranty association system, because non-profit insurance firms are not covered in that state. Health Maintenance Organizations also are excluded from many guaranty programs in other states.
Health Republic was founded by liberal New York political activist Sara Horowitz, who has known President Obama since the two worked together at Demos, a liberal New York think tank.
Horowitz is the only person approved by federal officials to start three Obamacare co-ops. Both New York and her Oregon co-op have failed. A third still operates in New Jersey.
Some critics of Obamacare wonder why the lack of insurance coverage was not advertised when the program began.
“Why wasn’t there some notice to people choosing among plans telling them, ‘by the way, if you choose this co-op and something happens to it in terms of solvency, it’s not covered under the guarantee law,’” Thomas Miller, a health care authority and resident fellow at the American Enterprise Institute, told TheDCNF.
“Wouldn’t that be part of informing people as to the choices they were making with these co-ops?” Miller said.
For the moment, New York customers are simply trying to find replacement coverage. But most don’t realize that without guaranty protection, there may be no money to cover their past medical bills.
Patients and medical providers will get “pennies on the dollar,” John Maldonado, president of the Medical Society of New York, told TheDCNF. “What you now have is an absolute fiasco.”
He said many doctors caring for Health Republic patients are not being paid for past medical services, and some have found the co-op’s checks are bouncing.
“As of two weeks ago, I know that two practices that had (Health Republic) checks that bounced,” Maldonado told TheDCNF.
New York State officials have been tight-lipped about Health Republic’s remaining assets. Health Republic received $265 million in federal loan money under Obamacare.
An investigation has been launched by the New York Department of Financial Services into Health Republic’s “inaccurate representations” of its financial condition. That disclosure has fueled fears the co-op has burned through most of its money.
On Dec. 3, Pascale Jean-Baptiste, an associate DFS attorney declined to release Health Republic’s financial records to TheDCNF under the state’s Freedom of Information Law, because of an exemption denying records due to “law enforcement investigations.” TheDCNF will appeal the decision.
But even without the investigation, it’s clear the co-op’s collapse has sparked a crisis throughout the state.
A survey of doctors conducted last month by the Medical Society of New York found that 28 percent of doctors treating Health Republic patients were owed up to $25,000. Twenty percent of doctors were owed up to $100,000 or more by the co-op.
Eight out of ten doctors said Health Republic has not provided doctors with “clear information regarding the implications of the company’s shut down.”
Jason Silverman, of the Total Capital Planning New York City employment benefits company, told TheDCNF that insurance brokers around the state have received no co-op commission payments in the last three months.
“We have not been paid from September, October or November,” he told TheDCNF.
Silverman, however, said the real victims of the failed co-op plan are patients facing serious medical conditions.
“The people who are facing hardships are the people who have ongoing medical procedures, where they were going to doctors to treat them for cancer. And they have appointments in November and follow up in December,” he said. “And all of a sudden, they’re gone.”
The unpaid losses for New York hospitals could quickly mount into hundreds of millions or even $1 billion dollars.
Mount Kisco Medical Group, for example, is trying to collect millions in unpaid medical claims from Health Republic, according to a report in the Poughkeepsie Journal.
Dr. Scott Hayworth, president and chief executive officer for the hospital group, said his institution only serves six percent of Health Republic customers, yet estimated their losses would be “in the millions.”
Already, the New York State Association of Health Underwriters on Dec. 7 asked the state to consider bailing out patients, doctors and insurance brokers. The association represents independent insurance brokers.
Peter Gallanis, the president of the National Organization of Life & Health Insurance Guaranty Associations, which represents all state guaranty associations, told TheDCNF only one co-op so far has reached the liquidation stage where its assets and debts are estimated.
“So far that’s only happened in the Co-Opportunity co-op case,” he told TheDCNF. Co-Opportunity Health, which served Iowa and Nebraska, collapsed in November, 2014.
Maldonado says that the ultimate losers are those who promoted health care reform in the first place.
“For most physicians, this is an expensive lesson. From a health reform point of view, we have a major credibility problem ahead of us. At this point, I can’t see many physicians go along with health care reform initiatives. They got taken once. They won’t get taken a second time.”
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