Health Republic Insurance of New York Announces that Coverage will End on November 30, 2015

November 23, 2015 | Health Services

Health Republic Insurance of New York (“Health Republic”) has announced that it will not offer coverage after November 30, 2015 leaving over 200,000 of its customers scrambling to find new health insurance. Health Republic is one of twenty-three non-profit insurance plans that were created under the Affordable Care Act to increase competition in the insurance market and create more choices for consumers at affordable premiums. Congress provided a $2.4 billion federal loan to assist with start-up costs. The plans struggled, however, to compete with larger, more experienced insurers and many have fallen into financial distress. Twelve out of the twenty-three  plans have announced that they will discontinue coverage for 2016.

Health Republic is the most recent plan to make the announcement, after the Centers for Medicare and Medicaid Services and New York Department of Financial Services (“DFS”) decided to wind down its operations. Customers were notified at the beginning of November that their coverage will end on November 30. They must now shop for new insurance on New York’s Health Plan Marketplace during the three month enrollment period, which ends on January 31, 2016. Plans sold on the marketplace run on a calendar year basis. Therefore, customers must purchase a new policy for the month of December and renew that policy or select another one for the 2016 calendar year. The deadline for customers to purchase coverage for December was November 15, but state authorities extended it to November 30. However, due to technological constraints, customers who decide to purchase coverage between November 15 and 30 will not be able to do so through the marketplace website, and must instead call customer service which can require much more time and effort.

While DFS has focused its efforts on protecting customers and ensuring continuity of coverage and care, providers have been left without answers and waiting in fear that they may not be paid for the professional services they rendered believing there was viable insurance coverage in effect. It is estimated that Health Republic owes over $150 million to hospitals alone. Kathleen Shure, Vice President of Greater New York Hospital Associated explained: “We know not everybody is going to be paid 100 percent, we just don’t know how bad it’s going to be.” On November 5, DFS told MagnaCare, the company that contracted with providers to establish provider networks for Health Republic, to put a hold on processing claims in an effort to conserve assets, however, MagnaCare may be under contractual obligation to process the claims even if Health Republic is unable to fund payment.

Health Republic lost $52.7 million in the first six months of 2015, adding to the $77.5 million that was lost in 2014. It is unclear how much Health Republic has on account or in reserves to pay claims, but DFS likely knows the extent of Health Republic’s resources and how grave the situation is for the providers of care to Health Republic’s insureds. DFS has stated that it will continue to work with consultants and hopes that at least “modest” payments can be made in the future. In the meantime, providers are left questioning how long the hold on claims will last, whether a fund will be established to help pay outstanding claims, and what to tell patients in need of care while they transition to new insurance plans.

Providers must be aware that, under New York law, they are prohibited from billing or collecting payment from a patient if the payment is owed by Health Republic. Providers may, however, elect to provide transitional care and continue to see patients who enroll in new insurance plans. When a patient enrolls in a new insurance plan under which their current provider is not considered in-network, the new insurer is required to allow the new enrollee to continue to receive ongoing treatment from their current provider during a transitional period of up to sixty days if the enrollee (1) has a life-threatening disease or condition or a degenerative and disabling disease or condition or (2) is in the second or third trimester of pregnancy. Such transitional care may be received only if the provider agrees to (1) accept reimbursement based on the in-network rates established for the insurer, (2) adhere to the insurer’s quality assurance requirements, and (3) adhere to other terms and conditions of the insurer’s policies. All other customers, however, who are not eligible for transitional care, are left with no real options but to find new providers under their new insurance plans.

DFS has announced several measures that it will take to protect customers from gaps in coverage. First, it will work with customers to ensure that they are not charged for an annual deductible on their December coverage. Customers must have evidence that they paid a deductible for 2015 on their Health Republic coverage to receive credit from DFS. DFS will also automatically enroll customers who do not purchase new coverage by November 30 into an alternative insurance plan that is sold on the marketplace. DFS hopes that this automatic enrollment will reduce the burden on patients in need of care and providers concerned with payment of claims.

DFS will also conduct an investigation of Health Republic’s financial records after learning that the insurer’s finances were “substantially worse” than what was reported to state authorities. It is important to note that Health Republic Insurance of New Jersey maintains independent operations and will not be affected by the closing of its New York counterpart.

The following questions remain unanswered: how did this situation become so dire so quickly; what information was available to the regulators of Health Republic indicating the financial distress and when was it known; why are the providers of the care to Health Republic’s insureds an afterthought in this debacle with respect to payment of claims for professional services rendered; have the premium dollars and other funding received by Health Republic for the payment of claims been accounted for; what were the executives of Health Republic aware of regarding the company’s financial distress and did they fail to act; what was Health Republic’s board of directors aware of; and what information was being provided to or requested by DFS and was the information accurate; when did Health Republic begin to be late or short on funding claims payments to MagnaCare’s network providers; is DFS investigating Health Republic’s senior management and board with regard to improprieties; and why is there no mechanism to fund provider claims under such circumstances?

Perhaps, or perhaps not, in the coming months we will learn the truth about the demise of Health Republic and how to ensure against this ever happening again, or at least making sure that the victims here – the providers of professional services – are not burned yet again.

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