Kentucky’s nonprofit health insurer set up under ObamaCare is shutting down because of financial problems, the latest in a string of closures for the nonprofit plans around the country.
Kentucky Health Cooperative, a nonprofit insurer known as a co-op, explained that it could not stay financially afloat after learning of a low payment from an ObamaCare program called “risk corridors.”
That program was intended to protect insurers from heavy losses in the early years of the health law by taking money from better-performing insurers and giving it to worse-performing ones.
However, the Obama administration 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.
“It is with sadness that we announce this decision," the insurer’s CEO, Glenn Jennings, said in a statement. "This very difficult choice was made after much deliberation. If there were a way to avoid it and simultaneously do right by the members, providers and all others that we serve, we would do so.”
The Department of Health and Human Services says that it recognizes that the low payments to insurers could have raised financial concerns for some insurers, and that as start-ups, not all co-ops would succeed.
The Obama administration said when making the risk corridor announcement earlier this month that the low payments could cause “isolated solvency and liquidity challenges” for a small number of insurers.
The Kentucky co-op is the fifth to close, following New York’s co-op last month.
“CMS’s priority is to make sure that Marketplace customers have access to quality, affordable coverage through the Marketplace,” said HHS spokesman Ben Wakana, referring to the federal agency that helps oversee the health law. “We are working with Kentucky officials to do everything possible to make sure consumers stay covered.”
The Kentucky co-op provides insurance for 51,000 people, who will lose their plans at the end of the year.
Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellHow the Democratic Party's campaign strategy is failing America GOP should grab the chance to upend Pelosi's plan on reconciliation We don't need platinum to solve the debt ceiling crisis MORE (R-Ky.) said the problems speak to the health law as a whole.
“Barely a week goes by that we don’t see another harmful consequence of this poorly conceived, badly executed law,” McConnell said in a statement. “Despite repeated Obama administration bailout attempts, this is the latest in a string of broken promises with real consequences for the people of Kentucky who may now be losing the health insurance they had and liked twice within the past three years because of Obamacare’s failures.”
The nonprofit co-op health plans were created under ObamaCare as a compromise after liberals failed to secure a government-run plan to compete with insurers.
Twenty-one of 23 co-ops nationwide were losing money as of Dec. 31, the HHS inspector general report found in July. Furthermore, enrollment was falling below projections for 13 of the 23 plans.