New York insurance regulators said Friday the financial condition of Health Republic of New York, the largest of 23 health insurance co-ops established by a $2.4 billion Obamacare program, is “substantially worse than the company previously reported in its filings.”
It is unclear if the co-op deliberately misled state regulators in their original filings, or if regulators found evidence of financial wrongdoing while they tried to close down the defunct non-profit. The co-op’s insolvency was announced September 25.
The New York Department of Financial Services, which regulates insurers in the Empire State, also reversed its earlier announcement to the co-op’s 215,000 policyholders that they had until Dec. 30 to find new insurance coverage. It now advises the co-op’s enrollees, many who are poor, that they have to secure new coverage within the next two weeks.
DFS said in the Friday release that consumers “must take action to choose a new plan for the remainder of 2015 on or before November 15, 2015.”
In their announcement, officials said “a subsequent NYDFS and CMS-led review of Health Republic’s finances has found that the company’s financial condition is substantially worse than the company previously reported in its filings to NYDFS.”
The announcement provided no further details on what are the new financial discoveries that plague the co-op, which received the largest single federal loan under the Obamacare health reform law. In addition to its original $265 million, the co-op received another $90 million in an emergency solvency loan funds from federal officials in September 2014.
The co-op previously reported it was burning through money at a disastrous rate. Its 2014 losses were $93.6 million, according to the National Association of Insurance Commissioners. In the first six months of this year, Health Republic lost another $53 million, bringing its net operating losses to nearly $150 million.
Health Republic was controversial from the very start. Its founder, Sara Horowitz, is a well-connected liberal political activist who once worked with then state-Senator Barack Obama. She was the only party approved by the federal government to open and operate three of the co-ops — in New York, New Jersey and Oregon.
Her Oregon co-op also reported in mid-October that it would be closing its doors by the end of the year, ending coverage for 15,000 customers.
The New York co-op is one of 10 Obamacare co-ops that have announced their closure since the program began in 2011. The non-profit co-ops were intended to compete with private for-profit insurers.
Health Republic also had some questionable expenditures in its first year of operation.
In its 2013 Internal Revenue Service filing, the non-profit disclosed it had steered $7.1 million in “management service” fees to Independent Workers Services, a Horowitz-owned subsidiary.
The co-op had a poor customer service record. DFS reported earlier this year that the the co-op had the worst consumer complaint record of any of New York’s health insurance companies in 2014. The co-op received 6,800 grievances in 2014, the second number highest grievances even though it was competing with giant insurance companies.
The federal Centers for Medicare and Medicaid Services, which awarded the funds to Health Republic, referred the Daily Caller News Foundation to DFS.