Health Republic demise: Insurers in NY call for changes in setting premiums

Health insurers called for more changes in the way premium rates are set and doctors and hospitals demanded the millions they are owed in a State Senate round-table discussion Wednesday on the demise of Health Republic.

Held by state Sens. James Seward (R-Milford) and Kemp Hannon (R-Garden City), the round-table included representatives of many of those affected by the state’s Nov. 30 shutdown of the federally backed insurer Health Republic.

Many concurred with Paul Macielak, president of the New York Health Plan Association, that the company, which had the lowest rates in seven of eight regions in the state, was doomed from the outset.

He blamed “a failed state policy” in which premiums proposed by insurers are typically lowered by the state Department of Financial Services.

William Golden, chief executive of the Northeast region of United Healthcare, said he was “always concerned” that the state’s process for setting rates for premiums “takes on a political tone.”

“There has to be some level of transparency and predictability,” he said.

But Troy Oechsner, special assistant to the superintendent of the state Department of Financial Services, said rates were vetted by actuaries and he attributed Health Republic’s failure to shortfalls in federal funding.

Health Republic was one of 23 Consumer Operated and Oriented Plans, or CO-OPs, created under the Affordable Care Act to provide low cost insurance. So far 12 have gone out of business nationwide.

Doctors and hospitals called on the state to pay them the estimated $200 million they are owed and to establish a fund in the future to ensure they are paid if another insurer goes belly up.

Dr. Joseph Maldonado, president of the Medical Society of the State of New York, said doctors are asking “will I get through this disaster, and do I want to participate in the next iteration?”

Oechsner said the state would pay “to the maximum extent possible” but that was likely to be a “modest” amount.

Seward, chairman of the insurance committee, raised the possibility of using some of the state’s $2.4 billion in various legal settlements to pay providers.

He also said he would reintroduce a bill to make the rates process more transparent. The bill passed the Senate unanimously last session but died in the Assembly.

The governor’s office said the state must complete its investigation before deciding how to compensate health care providers.

“Our first focus has been on protecting consumers,” said spokesman Rich Azzopardi. “The Department of Financial services has an ongoing investigation into this matter and the restructuring firm installed at Health Republic is still determining the total amount of unpaid claims after all offsets are applied. Once this analysis is completed, we’ll evaluate what, if any, steps are appropriate to take.”

Hannon said he was intrigued by a proposal to tie rates more closely to the medical loss ratio, which is a measurement used to identify what percentage an insurer uses out of its premiums to pay medical claims.