New York Legislators Examine Health Republic’s Failure

Hospitals and doctors told New York senators on Jan. 6 that they’ve got $200 million or more in unpaid bills because of last year’s financial failure of the insurance cooperative Health Republic, and they want the state to step in.

Other insurers and care providers who met at the Capitol in Albany, New York, also questioned the state Department of Financial Services’ methods for setting insurance rates lower than Health Republic had requested and obviously needed.

Health Republic had about 200,000 members enrolled through New York’s health exchange when it went under. State regulators automatically enrolled about half with other insurers who agreed to take them in November, and the rest were small group plans that had to find other coverage.

New York Senate Insurance Committee Chairman James Seward said he’ll again advance legislation to make the insurance rate-setting process more transparent.

The DFS has an ongoing investigation. A restructuring firm installed at Health Republic is still determining the total amount of unpaid claims after all offsets are applied, said Richard Azzopardi, spokesman for New York Gov. Andrew Cuomo. “Once this analysis is completed, we’ll evaluate what, if any, steps are appropriate to take,” he said.

The Greater New York Hospital Association proposed that the state establish a guaranty fund, which is financed by a temporary assessment on other insurers when a health plan becomes insolvent, that could retroactively pay bills and protect hospitals and patients. New York is the only state without such a fund, said association Senior Vice President Kathleen Shore.

An association survey found Health Republic owed hospitals as much as $165 million through October, a number that was expected to rise “significantly.”

Dr. Joseph Maldonado, president of the Medical Society of the State of New York, said many physician practices that took a financial hit are small and stretched to weather it. Health Republic is the 12th insurance plan nationally to go bankrupt, and the society told state officials a year before it failed about issues getting paid, he said.

Troy Oechsner, special assistant to the DFS superintendent, said that Health Republic’s insurance rates were certified by its actuaries, but some issues like subsequent cuts in federal support were not foreseeable in 2014. Insurer solvency is at the core of what regulators do, he said. “We feel we did the right thing at the time given the uncertainty.”