InHealth Mutual Fails
The company’s Westerville office is being shuttered and the Insurance Department will administer policies until members switch coverage. The Ohio Life and Health Insurance Guaranty Association covers claims of up to $500,000 when an insurer is in liquidation.
Adjusted projections show InHealth Mutual would end the year with a negative $20 million in assets if it were to continue to operate, according to the agency’s complaint in Franklin County Common Pleas Court.
Medical claims were coming in this year at a pace of $3 million a week, said an InHealth board resolution consenting to liquidation that was attached to the state complaint. Actuaries estimated it would have had to increase premiums by 60 percent in 2017 to catch up.
The insurer had set aside $32 million to cushion this year, but claims outstripped premiums by $28 million in the first quarter alone, according to its financial report filed with the agency. The state complaint said the adjusted projection of full-year losses jumped to $54 million.
The $32 million reserves had already been counted toward 2015’s $80 million underwriting loss. As I covered earlier this year, InHealth believed the set-aside would be enough to help it swing toward break-even.
InHealth is the brand name for Coordinated Health Mutual Inc., which as of early this year was among 11 survivors from 22 nonprofit co-ops created under an Affordable Care Act loan program. It received a $16 million federal loan for startup costs, for which payments were to start in 2017, and a $113 million loan to cushion expected losses on premiums. It had withdrawn all but $2.8 million of the second loan.
Co-ops are failing because Congress has refused to fund a risk-abatement program that was part of the original plan for co-ops in the law, the board resolution said. InHealth would have received $47 million and been solvent if the program had been funded. The absence of the law’s planned payments for taking high-risk members was cited in the failure of other state co-ops.
Meanwhile, federal rules forced it to accept extremely ill members outside of regular enrollment who were assigned to it by the U.S. Department of Health and Human Services. Those 91 members incurred $9 million in claims in 2015.
The federal government did set up a process this year by which co-ops could find outside investors, but the resolution said InHealth could not find any that met the stringent requirements.
InHealth representatives referred all questions to the Insurance Department.
The company earlier told me that its medical management programs were starting to turn things around for chronically ill members: hospitalizations for diabetic members fell 45 percent in 2015 and those with asthma had 62 percent fewer ER visits.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.
