By Sarah Ferris - 10/14/15 04:50 PM EDT
A sixth ObamaCare insurance startup announced it will shut its doors on Wednesday, escalating concerns about the future of a program designed to increase competition in the marketplace.
Tennessee’s insurance commissioner released a statement saying that its health insurance startup, also called a co-op, will no longer offer health plans in 2016 due to the growing financial burden.
“With thousands of Tennesseans’ coverage hanging in the balance, [the co-op’s] financial success could not be guaranteed,” commissioner Julie Mix McPeak wrote in a statement Wednesday afternoon.
Like Kentucky's, Tennessee's closure was also abrupt: The program had planned to offer coverage in 2016 and had already gotten approval for its new rates.
But McPeak said the state changed course this week after learning that it will get less help than expected from the federal government through its “risk corridor” program. That program is designed to protect insurers, including co-ops, from heavy losses in the early years of the healthcare law by reallocating money from better-performing insurers to those that are still struggling.
The Obama administration, however, announced on Oct. 1 that the program would pay out far less than requested because the payments coming in were not enough to match what insurers requested to be paid. Therefore, insurers only will receive 12.6 percent of the $2.87 billion they requested.
The Department of Health and Human Services (HHS) has acknowledged that, as startups, not all co-ops will succeed. Now, its priority is to help the 27,000 people who were previously insured through the co-op.
"We are working with Tennessee officials to do everything possible to make sure consumers stay covered," HHS spokesman Ben Wakana said.
Kentucky’s co-op CEO, Glenn Jennings, also cited the federal government’s lower-than-expected insurer payout as a reason for its collapse.
House Republicans announced two weeks ago that they were launching an investigation into the insurers, particularly focusing on the millions of dollars that have been invested.