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July 18, 2016

Fewer exchange options could increase health premiums

Access Health CEO James Wadleigh said the loss of HealthyCT won't impact the exchange's budget, but he worries about potential future impacts on premiums. HBJ PHOTO | Matt Pilon Access Health CEO James Wadleigh said the loss of HealthyCT won't impact the exchange's budget, but he worries about potential future impacts on premiums.

The state's health insurance exchange, Access Health CT, has lost another insurer, leaving just two participating health plans for the 2017 enrollment period, raising concerns that individual and business customers may see their premiums increase at a faster clip in the future.

HealthyCT — which the Connecticut Insurance Department (CID) has ordered to stop writing new business due to solvency concerns — was the latest company to exit the exchange, preceded by UnitedHealthcare earlier this year.

“I'm sad, disappointed, throw in your own adjective there, that we're losing HealthyCT,” said Access Health CEO James Wadleigh. “I would be concerned that there [will] be a limited competitive environment, which could have the potential of allowing healthcare costs to go up quicker than we had expected.”

Insurers have already submitted rate requests for 2017, but Wadleigh worries about the impact on 2018 rates, assuming the exchange can't convince other insurers to join its two dominant market-share holders, ConnectiCare and Anthem.

Wadleigh said it's been an uphill battle wooing new competitors to the market. UnitedHealthcare, which had a small number of Access Health customers, announced in April that it would exit most state exchanges in 2017. HealthyCT had 11,304 exchange customers, who will need to find new plans.

Wadleigh said he is confident about Anthem and ConnectiCare's commitment to the exchange. He called the two insurers financially strong and viable, and their combined exchange market share is about 90 percent of the 102,000 enrolled customers.

That's down from around 116,000 customers at the end of open enrollment earlier this year. The drop-off is the result of some policyholders not paying their premiums or providing needed paperwork, among other factors.

Shared fiscal challenges for co-ops

Under the Affordable Care Act, health insurance co-ops like HealthyCT were intended to provide nonprofit competition to large for-profit insurers to keep premiums down.

But many co-ops have struggled. Of the 23 that launched in 2013, less than half continue to write new business today.

Those hardships have been fueled by several factors, including Congressional funding cuts and the premium-stabilization program created by the Centers for Medicare and Medicaid Services, which is meant to smooth claims volatility – particularly for startup insurers – by making sure health plans don't take on too many healthy or unhealthy patients.

As part of that program, CMS recently ordered HealthyCT to pay a $13.4 million risk-adjustment payment — essentially a penalty for having a customer base deemed too healthy.

While state regulators said they had already planned to place HealthyCT under increased scrutiny starting this summer, the risk-adjustment fee created a large enough fiscal problem that the CID issued the supervisory order.

Ordering HealthyCT to cease writing new business and runoff existing business will maximize availability of funds to satisfy policyholders and creditors, CID said.

Risk-adjustment payments have been contentious, and both Insurance Commissioner Katharine Wade and Wadleigh have said they are concerned they could have damaging impacts on the market.

Several co-ops, including in Illinois and Maryland, have sued the federal government, either seeking to recoup premium-stabilization payments they feel they are owed or challenging fees like the one levied on HealthyCT.

What’s next for HealthyCT?

Since its 2013 inception, HealthyCT had grown quickly.

Its 2016 first-quarter revenue was $56.2 million, up from $33.7 million a year earlier, financial reports show. But expenses for medical benefits and prescription drugs also rose sharply over the year.

While things don't look good for HealthyCT, it's possible it could one day start writing new business again. The company could avoid court-supervised rehabilitation, which is similar in some ways to a federal bankruptcy proceeding, but conducted in state court, according to William Goddard, a partner at Hartford law firm Day Pitney, who specializes in insurance.

“The stars would have to align,” Goddard said. “The feds could pay, [HealthyCT] could raise new capital, or their [2016] underwriting could turn out to be way better than people thought.”

Goddard's colleague, healthcare attorney Susan Huntington, said operating under a supervisory order may also buy HealthyCT some time to challenge the risk-adjustment payment.

“By being put under supervision, it gives HealthyCT time to actually dig into whether the payment amount requested by the federal government is correct,” Huntington said.

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