Thread: Sixth ObamaCare startup insurer falls

Sixth ObamaCare startup insurer falls

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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.

The decision comes less than a week after the collapse of Kentucky's co-op. The two programs are among 23 that received seed money from the federal government to help create alternatives to traditional insurers — money that is looking less likely to ever be repaid.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.
http://thehill.com/policy/healthcare...-insurer-falls

Kentucky nonprofit health insurer to shut down




By Peter Sullivan - 10/09/15 05:24 PM EDT

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 McConnell (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.

http://thehill.com/policy/healthcare...macare-program

Another ObamaCare Co-Op Bites The Dust, As Taxpayer Costs Mount

BY JOHN MERLINE
08/27/2015
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On Wednesday, the Nevada Health Co-Op announced that it will go out of business at the end of the year. This is the third out of the 23 ObamaCare-created nonprofit health plans to fail, but it isn't likely to be the last.

After getting $69.5 million in government-sponsored startup loans, Nevada's co-op saw enrollment come in far lower than expected, and claims costs far higher, resulting in a $15 million loss last year.

CEO Pam Egan said the co-op was seeing the same dismal results this year, making it impossible to provide "quality care at reasonable rates."

Democrats who designed ObamaCare created these nonprofit co-ops in the belief that they could provide price competition in ObamaCare exchanges. To get them off the ground, the federal government pumped more than $2.5 billion in startup loans and $355 million in solvency loans when things started to turn sour last year.

The costly experiment has largely been a failure.

In the first year, several co-ops charged as much or more than the private insurers. And this year, co-ops in more than a dozen states have requested double-digit premium increases. Before calling it quits, Nevada's co-op was asking for hikes as high as 27.53%.

A recent audit found that enrollment in most of the state co-ops was significantly below expectations, and costs were far higher. All but one of the 23 co-ops lost money in 2014 — more than half saw losses that were higher than Nevada's.
Earlier this year, CoOpportunity — which served members in Iowa and Nebraska — ceased operations, and the Louisiana Health Cooperative announced it would close its doors at the end of the year. Tennessee's coop had to freeze enrollment this year amid mounting losses.

The three failed co-ops received a total of $310 million in federal startup and solvency loans. Overall, $2.9 billion in federal loans is at risk.

For perspective, Solyndra — the solar panel company that famously failed early in the Obama administration — cost taxpayers $500 million.

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Millions in the red, a Nevada Obamacare insurer has failed

By Jennifer Robison
Las Vegas Review-Journal

Nevada Health CO-OP, a nonprofit insurer created by the Affordable Care Act and federally funded to offer health coverage through the Nevada Health Link marketplace, said Wednesday that it cannot make enough money to stay in business after Jan. 1.

Co-op CEO Pam Egan said a second year of high claims costs and limited growth projections for enrollment made it "clear" the insurer would have a hard time providing "quality care at reasonable rates" in 2016.

"(Nevada Health CO-OP) is working responsibly and proactively with the Nevada Division of Insurance and the Centers for Medicare and Medicaid Services to ensure that we meet all deadlines and fulfill obligations to our current members," Egan said.

The nonprofit said members' policies will stay in effect through Dec. 31, and it is committed to fulfilling obligations to enrollees. It also said it will continue paying broker commissions.

Amid reports that the Affordable Care Act has slashed the nation's share of uninsured from more than 17 percent to less than 12 percent, the co-op's fate is a reminder that some components of the law don't work as intended.
Observers say the co-op, as idealistic as its origins were, could not survive market realities amid early troubles with doctor networks, reimbursements, off-exchange coverage and administrative costs. The co-op's failure is something of a blow to the state's competitive landscape, and it's unclear if it can repay $65.9 million in federal loans it received for its 2012 launch.

EARLY CONCERNS

Obamacare included member-run, locally based nonprofit insurers to increase competition for existing carriers. The idea initially worked: Nevada Health CO-OP had more than a third of the market in the 2013 enrollment period, beating out big, publicly traded competitors UnitedHealth Group and Anthem Blue Cross and Blue Shield.

But the market balanced out in 2014 and 2015, and the co-op slipped out of the top spot. Recent financial statements show it struggling to make money.

The nonprofit reported a $19.3 million operating loss in 2014, and a $3.5 million first-quarter loss through March, according to Centers for Medicare and Medicaid Services records. From January through June, it lost $22.7 million.

Some local insurance brokers said they had reservations early on about the co-op.

Pat Casale, managing partner of The MultiCare Group in Las Vegas, said he sold few co-op plans because he "wanted to kick the tires and make sure the vehicle drove well." He said his clients gravitated toward established, multibillion-dollar insurers as a safer bet.

Frank Nolimal of Assurance Ltd. said he mostly steered clear of the co-op.

"When I started seeing the problems they were having, I did not want to see my customers nor myself get into harm's way and have that disruption of business," he said.

Those problems included major mixups in provider networks.

Within weeks of the exchange's October 2013 launch, buyers of co-op coverage reported that doctors said to be in the insurer's network disputed having care contracts and refused to see them.

The co-op also had trouble paying specialists.

Southern Nevada's largest oncology practice, Comprehensive Cancer Centers of Nevada, left the co-op's network in July 2014, saying reimbursements took as long as three months. The industry norm is one month.

Plus, the co-op made a critical mistake:Only Nevada allows enrollment in non-exchange plans outside of the federal sign-up period, which runs from Nov. 1 to Jan. 31. Most insurers require a 90-day wait to discourage people from going without a plan until they get sick, but the co-op started with no waiting period, then added a 30-day window in late 2014. That created a sicker — and pricier — member pool, Casale said.

"They bought bad business, and that was poor management," he said.

But the co-op's biggest problem may have been its overhead. The U.S Health and Human Services Department's Inspector General pegged the co-op's administrative expense-to-premium ratio at 37 percent — almost double the 20 percent allowed under Obamacare.

Those costs included first CEO Tom Zumtobel's $417,000 annual salary — pay that might be reasonable for a local executive of a Fortune 100 insurer with a $100 billion market cap but is excessive for a small startup nonprofit with no members and less than $70 million in federal loans as its reserve, Casale said.

"They were the most top-heavy company in the marketplace," he said. "When it got out how much money their CEO was making, a lot of people were saying, 'Are you kidding me?'"

Zumtobel is now CEO of Arizona's co-op, Meritus Health Partners, which had an administrative expense-to-premium ratio of 134 percent in 2014, according to the inspector general. Zumtobel told the New York Times earlier this month that the co-op will lose $6.7 million in 2015, but be profitable in 2016.

LOAN REPAYMENT IN DOUBT

The co-op's closure drops Nevada Health Link's Clark County carrier base from five to four, including market giants UnitedHealth and Anthem, which already combine for more than 90 percent of the state's privately insured residents. A third carrier, Prominence, plans to expand from Northern Nevada into Southern Nevada. Humana will also offer two local plans on the exchange for 2016.

Bruce Gilbert, executive director of the exchange, said he doesn't believe the closure will hurt competition.

"We actually have a fairly vibrant marketplace. You can see that from Humana coming in," Gilbert said. "I understand co-ops were meant to provide a competitive balance, but I don't know that they have done that in any of the states in which they're operational. They're all struggling, so it's not about rates or ability to gain market share. Maybe they're just victims of competition in the insurance market."

Gilbert also said the co-op was worth a try, despite its failure.

"Innovation is good. It's not always successful, but it's good," he said. "It's not easy to put together an insurance company under the best of circumstances, but the exchange appreciates the attempt."

That attempt may now cost taxpayers.

The co-op's federal loans — one with a five-year term; the other 15 years — went mostly to the Nevada Division of Insurance to ensure the organization could pay its claims. Profits to repay those loans have yet to materialize.

The state Division of Insurance didn't respond to a request for additional comment by press time Wednesday, so it's unclear if any money will be left after outstanding claims are paid.

Nevada Health CO-OP is the fourth co-op nationally to fail.

Louisiana's Health Cooperative closed in July after suffering a net operating loss of more than $20 million.

Iowa's CoOpportunity Health closed in January, after a sicker-than-average customer base took a financial toll despite $145 million in federal loans.

A co-op in Vermont was shuttered in 2013, before it even began selling plans.

Nevada Health CO-OP may not be the last of it. The inspector general found that 22 of 23 co-ops lost money in 2014, with Maine the exception. The federal government lent $2.4 billion to start co-ops nationwide.

"It is sad to see all of the federal tax dollars that were used to put up this suggested competition for the insurance companies and seeing it fail," Nolimal said. "Co-ops were supposed to keep carriers in line with competition. We threw all of this money at them — millions and, throughout the country, billions of dollars. They failed."

Nevada Health CO-OP started in 2012 as Hospitality Health CO-OP. It was sponsored by the Culinary Union's Culinary Health Fund, its national parent UNITE HERE Health and the Health Services Coalition, a consumer advocacy group with more than 300,000 members employed by cities, unions and big companies.

Unions still play a key role in the co-op: Culinary head D. Taylor and Nevada AFL-CIO executive Danny Thompson were listed as directors in a June 30 financial statement.


http://www.reviewjournal.com/busines...rer-has-failed

Failing Obamacare Co-Ops Offer Lavish Executive Pay — And May Violate the Law [INFOGRAPHIC]

RICHARD POLLOCK
12:40 AM 06/30/2015

Taxpayer-funded Obamacare health insurance co-op’s may be running afoul of the law by giving extravagant paychecks to their top executives, according to a Daily Caller News Foundation investigation.

More than a million Americans have enrolled in the 23 non-profit Obamacare co-ops since they began in 2011. The co-ops were intended to be consumer-operated non-profits focused on delivering healthcare to the working poor and others needing health insurance.

Eighteen of the 23 co-ops paid their top executives prodigious salaries ranging from $263,000 to $587,000, according to 2013 IRS tax filings.

The high take-home pay for the “nonprofit” executives appears to violate both federal law and Obamacare rules prohibiting “excessive executive compensation.”

The co-ops were originally funded in 2011 with $2 billion under Obamacare in an experiment to provide tax-paid competition to private sector health insurance providers.

Most of the Obamacare co-op executives are paid more than members of Congress, Supreme Court justices, U.S. cabinet secretaries and the governors of all 50 states.

Fears about excessive compensation were raised in 2011 by a key Obamacare co-op advisory board which set rules for the untested co-ops.

At a March 24, 2011, Washington, D.C. meeting, advisory board members openly agonized about the possibility of “unjust enrichment” by unscrupulous founders who sought to capture millions of dollars at the presumably “non-profit” cooperatives. They could not agree, however, on regulatory language to prohibit it.

TheDCNF probe found that their fears were justified.

Infographic: For the names of the CEOs and their 2013 salaries hover pointer over the state and box will appear with name and salary. - Obscene amounts

The six-figure co-op salaries are two to four times higher than the $135,000 median executive healthcare pay reported in an October 2014 nonprofit CEO compensation study published by Charity Navigator. Charity Navigator is a nonpartisan group that tracks philanthropic and charitable organizations.

The Department of Health and Human Services’ Centers for Medicare and Medicaid Services, which oversees the federally funded co-ops, warned them in December 2011 that federal law bars the use of tax funds “to cover excessive executive compensation.”

Aaron Albright, a CMS spokesman, told TheDCNF that “the use of federal CO-OP loan funds is prohibited from, among other restrictions, providing excessive executive compensation.”

Albright did not define “excessive” compensation but he suggested that CMS approved the high salaries because his centers “review employment agreements for top executives of co-ops for compliance with the loan agreement.”

A section of the Bipartisan Budget Act of 2013 established limits for federal contractor executive compensation at $487,000. At least five co-op executives were paid above those limits, including South Carolina, Arizona, Illinois, Massachusetts and Louisiana.

The co-ops were also required by CMS to conduct surveys to “reflect the market rate for a similar position in your area.” Despite the government’s directive, however, only half of the co-ops conducted a review, according to their IRS forms.

The high co-op salaries also appear to conflict with President Obama’s personal campaign against high executive pay, which included his 2009 appointment of a “compensation czar” to investigate executive salaries at private companies.

Taxpayer advocates contacted by TheDCNF were outraged by the generous pay, especially in light of the perilous financial conditions that have many of the co-ops facing doubtful futures.

“I think it’s pretty shocking that they’re making that much money and what’s even worse is that most of these co-ops are failing,” said Elizabeth Wright, health and science director for Citizens Against Government Waste, a conservative non-profit advocacy group that has exposed wasteful federal spending since 1984.

Wright pointed to the collapse in December 2014 of the Iowa-based Co-Opportunity Health as a prime example of Obamacare co-op mismanagement. Co-Opportunity received $177 million in federal start-up loans before state regulators took it over and declared it in “hazardous” condition.

Before its collapse, David Lyons, Co-Opportunity’s president and CEO received $261,000 in compensation. Stephen Ringlee, Co-Opportunity’s CFO, received $257,000, despite having failed in several previous startups. Clifford Gold, its COO, took in $288,00.

Their pay was seven times the income for individual workers in Iowa, according to U.S. Census Bureau data.

“This is really, really shocking, especially when you see how abysmally these co-ops are performing,” said Grace-Marie Turner, president of the Galen Institute and a critic of Obamacare.

“What they have done is the worst of both worlds. Their organizations are failing and they’re paying CEO’s exorbitant salaries that are completely in contrast with the concept the co-ops were supposed to stand for,” Turner said.

Wright said it appears the co-ops have turned the familiar private-sector principle of “pay-for-performance” on its head in determining executive compensation: “They seem to be more careful managing their salaries than they are running the organizations they’re running.”

“As a president of a non-profit, you need to be a lot more fiscally responsible and fiscally cognizant of what you’re doing, and not just seeing it as a landing pad for a high paying salary,” said David Williams, president of the Taxpayers Protection Alliance, another conservative non-profit advocacy group that analyses government spending and programs.
http://dailycaller.com/2015/06/30/fa...the-law-video/

Crony Obamacare Co-ops Hid Millions In Exec Pay, Consulting Fees

Posted on July 4, 2015
by Richard Pollock

Many of the Obamacare health insurance co-ops are either burying in obscure tax return footnotes vital information about extravagant compensation paid to their top executives or they’re simply not bothering to report it at all, according to a Daily Caller News Foundation investigation.

Among the worst offenders is the Chicago-based Land of Lincoln Mutual Health Insurance co-op, which reported that its chief executive officer, Daniel Yunker, was paid only $79,00o and chief financial officer Dennis Rizzo earned a mere $50,000 for 2013.

Land of Lincoln also claimed that Yunker earned only $3,956 and Rizzo $5,425 from “related nonprofits.”

William Donahue, the COO appeared to be the top earner at the co-op, earning a modest $165,000.

Left unstated were Yunker and Rizzo’s salaries at the Metropolitan Chicago Healthcare Council, the co-op’s official sponsor, was $460,186 for Yunker and $286,409 for Rizzo.

That made Yunker’s actual total annual salary $543,000, not $79,000, and $341,000 for Rizzo, not $50,000. Similarly, the co-op claimed on its tax return that its chairman, Kevin Scanlan, received zero dollars from a “related group” when in fact the MCHC paid Scanlan $916,403.

Overall, at least six non-profit co-ops reported in footnotes that consulting firms pocketed an additional $26.5 million for “management fees,” with large chunks of those payments ending up in the pockets of the top executives.

On Tuesday, DCNF reported that 18 of the 23 operating non-profit co-ops paid their top executives’ salaries ranging from $263,000 to $587,000, according to 2013 IRS tax filings. Those figures appear to violate federal laws and regulations barring “excessive compensation” for tax-funded enterprises.

The co-ops were intended to be federally funded consumer-operated non-profits competing with private sector insurers in delivering healthcare to the working poor and others without health insurance.

More than a million Americans have enrolled in the co-ops since they began operating in 2011 with $2 billion in start-up funding included in Obamacare. The co-ops are overseen by the Department of Health and Human Services’ Centers for Medicare and Medicaid Services.

Aaron Albright, a CMS spokesman, told DCNF that “the use of federal CO-OP loan funds is prohibited from, among other restrictions, providing excessive executive compensation.”

Many of the co-op executives are better paid that the President of the United States, Members of Congress, Supreme Court Justices, U.S. cabinet secretaries and all 50 state governors.

Some have worried about the co-ops’ becoming tools for unjust enrichment in the health insurance field.

Bill Oemichen, a sitting member of the Federal Advisory Board on Co-ops set up by CMS, told a March 14, 2011, meeting of that panel that he feared unscrupulous co-op leaders and greedy consulting companies might seek “unjust enrichment” during the early formative years of the Obamacare co-0ps.

“We want to make sure that there’s no unjust enrichment,” he told his colleagues, according to the official minutes of the meeting.

Non-profit watchdogs interviewed by DCNF were also surprised by the co-ops’ high compensation figures and deceptive reporting practices.

“I do question the fact that the salaries are not in the co-op’s 990s,” said Scott Amey, general counsel for the Project on Government Oversight, a non-profit watchdog. “It is a glaring omission.”

Three Health Republic co-ops — in New York, New Jersey and Oregon — set up by New York’s Freelancer’s Union, at first appeared to pay reasonable executive salaries. The three co-ops established by Health Republic received a total of $435 million in start-up funding from the federal government.

However, in “supplemental” tax return footnotes, the three co-ops reported paying $17.3 million for “management services” provided by Independent Workers Services, which has the same Brooklyn, New York, address as the Freelancer’s Union.

The Freelancers Union was founded by former labor lawyer and liberal political activist Sara Horowitz. She and then-state senator Barack Obama served together as board members of a New York-based liberal think tank.

At the Louisiana Health Cooperative, CEO George Greg Cromer, was reported to have been paid $105,000. Buried in the footnotes, however was the fact that the co-op paid $1.3 million to Terry Shilling, to serve as the Louisiana co-op’s “interim CEO” in 2013.

Shilling applied for and received the original $66 million in federal start-up money in 2012 for the Louisiana co-op. CMS officials awarded the funds to him even though he was convicted in 1998 on insider trading charges brought by the Securities and Exchange Commission.

Veronica Piotrowski appeared to earn $131,000 as the highest-paid executive of the Tempe, Arizona-based Compass Cooperative Mutual Health Network co-op. Kathleen Oestreich, the CEO, Jean Tkachyk the COO, and Tere LeBarron, the chief health officer, were reported to be unpaid for their work.

But entire Compass co-op management team comes from a for-profit partnership called Eastwick Strategy Group, which paid Oestreich $420,000, Tkachyk $296,000 and LeBarron $282,000.

Separately, the co-op also paid Eastwick an additional “management fee” of $2 million and another $5.4 million for “consulting.”

None of the co-ops returned repeated calls from DCNF seeking comment.

http://freedomforce.com/4799/crony-o...nsulting-fees/