Unprofitable Tennessee Health Insurer to End Coverage for Thousands
By Kevin McKenzie
A nonprofit Tennessee health insurer founded with $73 million in loans provided by the Affordable Care Act won't offer insurance next year.
Community Health Alliance, which began providing health coverage in 2014, is voluntarily winding down and won't offer coverage in 2016, the Tennessee Department of Commerce and Insurance announced Wednesday.
The Knoxville-based insurer is among co-ops serving at least five other states that are also winding down service.
Community Health, which has enrolled about 27,000 people statewide, until Dec. 31 will continue serving its existing customers who pay their premiums, officials said.
Those customers, including an undisclosed number in Memphis, will have to choose other insurance companies for coverage during the 2016 open enrollment period that begins Nov. 1 for the HealthCare.gov insurance marketplace.
Community Health chief executive Jerry Burgess in a statement on the insurer's website said that a low reimbursement rate for a federal program that was meant to cushion insurers' losses triggered the decision.
"Last week's announcement of a risk corridor reimbursement of just 12.6 percent cast doubt on the collectability of over $17 million of CHA's risk corridor receivable and led to an unavoidable outcome," Burgess said. CHA refers to Community Health.
Last January, state and federal regulators froze enrollment for CHA insurance plans. With attractive pricing that dramatically grew enrollment, regulators questioned whether the insurer's finances could handle the load.
In addition, federal regulators questioned the impact of an overall rate increase of nearly 45 percent for individual coverage that CHA planned.
In February, the federal Centers for Medicare & Medicaid Services placed CHA on a "corrective action plan." Among the federal agency's concerns were a hazardous financial condition, management deficiencies, member complaints about inadequate physician networks and failure to pay agents and brokers.
A July report by the U.S. Department of Health and Human Services Office of the Inspector General cited the financial concerns about Tennessee's co-op as an example of how lower than expected enrollments and net losses were taking a toll on the 23 started by health reform's Consumer Operated and Oriented Plans program.
The Tennessee co-op lost $22 million in 2014 and was projecting a loss of about $3.7 million for 2015, according to the report.
The federal government awarded a total of $2.4 billion in loans for the start-ups to encourage competition for health coverage. Lower than expected enrollment for 13 of the co-ops and net losses at 21 for 2014 "might limit the ability of some co-ops to repay startup and solvency loans and to remain viable and sustainable," the office of inspector general report said.
(c)2015 The Commercial Appeal (Memphis, Tenn.)