Insurance Department will seek to liquidate HealthyCT
The Connecticut Insurance Department plans to seek a court order to liquidate insurer HealthyCT at the end of the year, following an appointed overseer’s report that the nonprofit company – created with federal funds made available through Obamacare – is insolvent.
As of October, the Wallingford company had 30,973 customers, but only about 7,000 are expected to still be covered through group plans in January, according to the status report, filed in Superior Court this week. The Connecticut Insurance Department prohibited HealthyCT from selling new policies or renewing existing coverage in July, and the company’s 13,527 individual-market plans are scheduled to end Dec. 31.
“[F]urther attempts to rehabilitate HealthyCT would be futile and would substantially increase the risk of loss to the company’s creditors, policyholders, and the public,” said the status report, filed by Insurance Commissioner Katharine L. Wade. It was based on the findings of Daniel L. Watkins, a Kansas-based insurance receiver who is serving as Wade’s special deputy rehabilitator in the case.
If the department’s request to liquidate the company is granted, claims would be paid by the Connecticut Life and Health Insurance Guaranty Association with funds collected through assessments on licensed health insurers. People still covered by HealthyCT after Dec. 31 would need to find new insurance plans by the end of January, and Wade said the department is working with the company and insurance brokers to help those customers find new coverage.
In the meantime, customers should continue to get care as usual, Wade said.
“This is not something… we did lightly,” Wade said, adding that she had hoped the company would have enough cash on hand to continue operating until June, when its final group policies were set to expire. “They’ve had worse claims experience. It’s deteriorating and we’re now at a point where they’re not going to have enough cash on hand.”
Wade said the insurance department has met monthly with HealthyCT leaders since the company began, treating it as a start-up. HealthyCT began offering coverage Jan. 1, 2014.
The status report offers a glimpse at the financial challenges faced by HealthyCT, which lost $45 million during the first nine months of 2016.
In July, when the insurance department stopped the company from offering policies, Wade said HealthyCT’s financial health had been “seriously jeopardized” by a federal requirement that it pay $13.4 million as part of a risk adjustment program under the health law designed to redistribute money from companies with lower-risk customers to those with higher-risk enrollees.
But HealthyCT also has faced high claims costs, paying out more in medical and pharmacy bills than it collected in premiums, according to the report. The spending was driven primarily by “high-cost claimants” with individual-market coverage, the report said.
The report also said the company has “no realistic near-term access” to federal payments designed to spread risk, and no access to capital from private sources.
Projections indicate that the company will have approximately $10 million at year end after paying claims and other expenses, but will have incurred $17 million in additional health care claims.
The company cut 34 employees Oct. 31, leaving 41; that is expected to drop to 24 by Dec. 31. Chief Executive Ken Lalime plans to leave Dec. 15, according to the report.
Commissions to insurance agents and brokers have been suspended pending court review, according to the report.
The company referred all questions to the insurance department.
HealthyCT was one of 23 consumer oriented and operated plans, or CO-OPs, created under the federal health law. All but a handful have since stopped operating.
More information from the insurance department, including notices for employers, health care providers and brokers, is available here.
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