Arches Health Plan to stop operations

SALT LAKE CITY — About 45,000 Utahns who use Arches Health Plan will need new health coverage beginning in 2016 because of a severe shortfall in expected federal funding, the Utah Department of Insurance announced Tuesday.
Arches customers will continue to receive full coverage through Dec. 31, the department said.
The Department of Insurance will take Arches into receivership, meaning it will supervise the processing of the health co-op's remaining claims.
Arches, the only co-op health plan in Utah, began offering insurance through the Affordable Care Act in fall 2013, beginning coverage in January 2014. The nonprofit group says it's ceasing operations because of a lack of funding from the federal "risk corridor" program, which was built into the Affordable Care Act and intended to protect insurance companies from their losses.
"As one of the carriers on the (health care) exchange, we stood to benefit by our calculations in excess of $30 million for those 'risk corridor' payments," Tricia Schumann, chief marketing and communications officer for Arches, told KSL. "We did anticipate those cash payments coming in … this quarter."

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The point of the fund was to mitigate losses among insurance companies and co-ops that suffered large financial risk associated with the Affordable Care Act because of unprecedented enrollment for coverage.
However, federal officials announced Oct. 1 that only 12.6 percent of the expected windfall from that risk management fund would be awarded to insurance companies.
Schumann said Arches was stunned by the announcement of the shortfall.
"Honestly, if this had not occurred, we were in a very good trend moving forward, and it was a complete surprise to us," she said. "We did not know the federal corridor program would not pay out 100 percent until the first of October."

What is a CO-OP?

A CO-OP is a new type of nonprofit health insurer that is directed by its customers, uses profits for customers' benefit, and is designed to offer individuals and small businesses affordable, customer-friendly, and high-quality health insurance options. Source: CCIIO.cms.gov

Arches now has an unanticipated $27 million cash shortfall on its books as a direct result, Schumann said, but will be able to meet all of its obligations on current plans. She urged health care providers to honor Arches insurance plans for the remainder of 2015, saying they will be compensated.
"We don't want anyone's health compromised during this circumstance," Schumann said.
Other insurance companies in Utah suffered more financial risk from an influx of consumers, Schumann said, but were in a better position to handle those setbacks.
"Arches is a startup. We are 3 years old, and we are more vulnerable to not having this cash come in," she said. "We do not have cash reserves that some other large health plans in our market do to fall back on."
The Utah Department of Insurance allowed Arches until Tuesday to find financial partners or come up with other ways to make up the millions lost in expected funding, but the company was unable to do so.
Schumann said she didn't know the detailed explanation for why the risk corridor fund, which was intended to reallocate funds between health insurance companies depending on financial risk incurred, failed to approach its projected payout.

Frequently Asked Questions
What will happen to my insurance?
You will need to purchase health insurance from another company. If you have an individual plan, contact your insurance agent or shop on Healthcare.gov starting November 1. If you are on a group plan at work, talk to your human resources representative.

Should I keep paying my premium?
Yes. You must keep paying your premium through the end of your plan year to keep your coverage. If you have an individual policy through Healthcare.gov, your plan year ends December 31, 2015. You will need to have new coverage effective January 1, 2016.

Will my claims still be paid?
Yes. As long as you have been paying your premium, any doctor visits or procedures that you make prior to the end of your plan year will be paid by Arches.

(Answers from Arches Health Plan)

"It could be as simple that no one anticipated the degree of risk that's in the market," she said.
Todd Kiser, commissioner of the Utah Insurance Department, said the agency's main priority is helping Arches customers transition to a new carrier with as much ease as possible.
"We want to make sure they have a soft landing," Kiser said. "There are going to be people that … don't know what to do. They're going to be nervous, perhaps a little fearful, and we want to alleviate those fears and challenges that they're going through. We want them to call us. We want to help them."
Those who wish to be enrolled in a new health insurance plan by Jan. 1, ensuring no lapses in their coverage, must apply for insurance on healthcare.gov by Dec. 15. Enrollment on the website opens Nov. 1.
Kiser said rural Utahns will be most affected by the shuttering of Arches. In 20 of the state's 29 counties, including Washington and Cache counties, only one other health care provider is available as an option in open enrollment through heathcare.gov.
"It's regrettable that this has happened," Kiser said. "We didn't want to see it come to this. We would have preferred another resolution, but it didn't happen, so we want to take care of those people."
Kiser anticipates some 60 or so Arches employees will be temporarily retained to help his department process remaining claims, but others will be let go, he said.
At least seven co-op health plans, which are active in 23 states around the country, have failed and have or will shut their doors at some point, according to Kiser. Two other insurance companies are also on the brink of failure after not receiving adequate "risk corridor" funding from the federal government, he said.
Kiser urged any Utahns with questions about how their coverage will be affected to visit www.insurance.utah.gov or call his department at 801-538-3077.