Meritus Shut Down by AZ DOI

The Arizona Department of Insurance has deemed the Meritus health insurance cooperative to be insolvent and has ordered them to stop doing business as of January 1, 2016.

Meritus will continue to cover the 59,000 Arizonans enrolled in its health insurance plans and will continue to pay claims for the remainder of 2015.  But Meritus cannot renew those 59,000 policies or write new business.

59,000 Arizonans will have to pick a new plan during the Open Enrollment Period that runs from November 1st, 2015 to January 31st, 2016. Most of those people get help paying their premiums and will enroll through healthcare.gov.

In  a recent meeting with insurance brokers, Meritus managers said they had made changes to their business and expected to stop losing money next year.

Meritus had been expecting significant reimbursements from  an Affordable Care Act program that was designed to help insurance companies that lost money in the first three years of the new health insurance market. But it was recently announced that the Risk Corridor program was underfunded and could provide only 12.6% of what money-losing insurance companies had expected to cover their losses.

The Health Affairs blog explains the Risk Corridor program:

Although the ACA is not entirely clear whether the risk corridor program was intended to be wholly self financing, CMS has taken the position that it will be, at least for 2014. Under the 2015 “Cromnibus” budget bill, Congress specified that payments out to insurers under the program during 2015 could not exceed collections. Thus, as already mentioned, payments in 2015 for 2014 will be paid out at 12.6 percent of claims, assuming full collections of contributions owed. Collections will begin in November and payments in December of 2015.

As a non-profit co-op that received $93 million in start-up loans from the government, Meritus is not allowed to raise money like any other business with 55,000 paying customers could do.  With expenses exceeding revenue by two million dollars each month, the Arizona Department of Insurance (AZDOI) says Meritus cannot meet its financial obligations and must shut down. Meritus says they have $30 million in reserves and expected to improve their financial situation in 2016.  The AZDOI won’t give Meritus the opportunity to raise rates and make up their losses in 2016.

I took a quick quick look at health insurance plans offered in Tucson for 2016 and I saw:

• Only UnitedHealthcare will offer PPO plans in 2016.
• Only Humana is offering a Platinum plan in 2016.
• Premiums will be a lot higher in 2016.  That might not affect the 80% of Arizonans who get big subsidies based on their low income – but people who get no premium help, or those who get a small premium subsidy, will have sticker shock.