New York: The Health Republic Meltdown is embarrassing for just about everyone

Sometimes you just need the headlines to tell the story:

• 09/25/15: NEW YORK: Health Republic 4th ACA Co-Op to close down

• 11/01/15: NEW YORK: Good grief. Health Republic CO-OP enrollees won't even be covered thru the end of 2015.

• 11/03/15: NEW YORK: Up to 166K people facing literal disaster in 12 days due to bureaucratic f*ckups.

• 11/07/15: NEW YORK: Latest Health Republic Co-Op developments not exactly confidence-building

• 11/07/15: NEW YORK: Health Republic enrollees *MAY* have one more option...

• 11/08/15: NEW YORK: Excellent development in the Health Republic saga! (seriously)

I haven't written much about the Health Republic of New York disaster since last fall. The short version is that it, like a dozen other ACA-created Co-Ops, fell apart at the seams due to a perfect storm of factors. Some of the Co-Ops failed primarily due to Marco Rubio's "Risk Corridor Massacre" political stunt (which, I should note, not only hurt a lot of people and caused a lot of confusion, but also will likely end up costing the government more than it would if the RC program had just been left in place as is...and Rubio's presidential bid wasn't helped by the gimmick either, meaning that he did it all literally for nothing). However, in most cases there were other causes, including simple mismanagement.

And then there's Health Republic of New York.

In an in-depth article at Crains New York, Michael Waldholz details the rise and fall of HR of NY. The photo accompanying the story is pretty appropriate:

Health Republic Insurance of New York was an instant hit when the Obamacare rollout began in October 2013—and that was no fluke. Executives at the fledgling insurer had a two-pronged marketing strategy to ensure its popularity: They would offer very low premiums and a choice of New York’s top hospitals at a time when competitors were shrinking their networks of doctors to hold down costs.

The low premiums attracted a crush of members, including some of the sickest New Yorkers. On the first day that Health Republic offered coverage, in January 2014, five new enrollees were admitted to Memorial Sloan Kettering Cancer Center for expensive treatment. The insurer’s costs skyrocketed.

The medical director charged $30,000 in prescriptions to his credit card. "It was chaos from day one. We never recovered."

It goes on and on and on. No one is spared:

• The wording of the final version of the ACA itself, for changing the initial start-up grants into loans and for not allowing the Co-Ops to accept outside funding
• Original interim CEO Daniel McGowan and his team, for deliberately setting initial premium rates far lower than their actuarial firm, Milliman, had recommended
• The NY Dept. of Financial Services, for approving the initial rates and then refusing to let Health Republic raise them when they realized that a disaster lay ahead
• The decision to speed up their provider network growth by basically subcontracting (or "rent") an existing network, which jacked up costs
• The replacement of McGowan with Debra Friedman, whose only experience was with Medicare, not private insurance policies
• Massively underestimating the massive enrollment demand (which they should have anticipated, given that they deliberately underpriced specifically to snap up market share out of the gate)
• And finally, yes, having the Risk Corridor program, which was supposed to be in place to help mitigate some of the problems, cut off at the knees halfway through the second open enrollment period.

I strongly encourage people to read the entire, ugly story.

Meanwhile, Jonathan LaMantia has a follow-up article today (with the same image) on the actual fallout for the hospitals, doctors and so forth who were left holding the bag:

Liquidation begins for failed Obamacare insurer

Hospitals and other providers may get a small portion of the money they are owed

After months of uncertainty surrounding Health Republic Insurance of New York’s liquidation process, new court documents released April 22 provide clarity on what creditors can expect to receive. That is a welcome development for doctors and other providers who say are owed more than $200 million.

The state Department of Financial Services, now led by Acting Superintendent Maria Vullo, began the liquidation proceeding last week by filing a verified petition and order to show cause in New York State Supreme Court. In doing so, Vullo declared the insurer insolvent, given "required reserves and other liabilities exceed its admitted assets."

While that description gets to the heart of Health Republic’s insolvency, a Crain’s investigation published last week described several factors contributing to its demise, including initial premiums that were set too low, missteps by inexperienced executives and an over reliance on outside vendors to perform key operational functions.

The initial court documents do not specify the value of claims against Health Republic nor the value of assets available to pay debts. DFS previously noted that a provider should be able to receive a portion of their claims. But it’s now clear vendors and brokers are out of luck.