By Peter Sullivan - 10/16/15 02:03 PM EDT
Two nonprofit health insurers set up under ObamaCare announced on Friday that they are shutting down, the latest in a string of closures due to financial problems.
The closure of the two health insurers in Colorado and Oregon means that just 15 of the original 23 co-ops will remain in business next year.
This month marks an important time for co-ops to decide whether they will continue, with the sign-up period for next year’s ObamaCare coverage beginning Nov. 1. Co-ops did not want to start offering coverage and then have to shut down in the middle of next year.
Many of the beleaguered co-ops have blamed low payouts from an ObamaCare program known as risk corridors. That program was designed to protect insurers against heavy losses by collecting money from insurers doing well and giving it to insurers faring poorly. But the Obama administration announced on Oct. 1 that the program had only taken in enough funds to pay out 12.6 percent of the $2.87 billion that insurers had requested.
“The government’s refusal to honor its risk corridor obligations represents a negative financial impact of over $20 million,” said Dawn Bonder, CEO of the Oregon co-op Health Republic Insurance. “This has placed us in a difficult financial position that could jeopardize our members and partners. As a result, we believe the most ethical step is for Health Republic to refrain from entering the market in 2016 and begin an orderly wind down of business.”
Colorado HealthOP co-op stood out from the others by protesting the decision of the state Division of Insurance to shut it down.
"We are astonished and disappointed by the Colorado Division of Insurance's decision,” the co-op’s CEO, Julia Hutchins, said in a statement. “It is both irresponsible and premature.”
The co-op said that it is profitable and in a “strong financial position.”
The Colorado Division of Insurance attributed its decision to the low risk corridors payments collected by the Centers for Medicare & Medicaid Services (CMS).
“Our decision is a direct result of this shortfall by CMS, and I sympathize with the HealthOP, but the Division has requirements and it has to protect consumers,” Colorado Insurance Commissioner Marguerite Salazar said in a statement.
The Obama administration acknowledges that more co-ops could shut down in the future. CMS says it always expected that not all of the co-ops would succeed, but also recognizes that the low payments from the risk corridors program could cause problems for some insurers.
“CMS’ priority is to make sure that Marketplace customers have access to quality, affordable coverage through the Marketplace,” Aaron Albright, a CMS spokesman, said in a statement. “We are working with Oregon and Colorado officials to do everything possible to make sure consumers stay covered.”