One of the bright spots in the otherwise beleaguered landscape of nonprofit health insurance co-ops doesn't look so bright anymore.
Less than four months after announcing soaring enrollment in its plans, Meritus Health Partners, an Arizona co-op offering plans on the Obamacare exchange, says it will be closing shop at the end of the year. The nonprofit insurer simply isn't getting enough money from premiums to cover its claims.
The group's attempts to find other financial backing have also come up short.
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"We've really been trying to understand all of our options and opportunities and really at this stage we've exhausted them," Meritus CEO Tom Zumtobel told the Associated Press. "So we are working cooperatively with the Department of Insurance to really meet their supervisory order and wind the operation down."
That means roughly a quarter of Arizonans participating in plans through the Patient Protection and Affordable Care Act exchange will have to find new insurance in January. As of August, 59,000 were enrolled in a plan offered by Meritus.
Like other co-ops operating on the PPACA exchanges, Meritus' startup money came from a $93 million federal loan. That money came from the $6 billion Congress originally approved to support the new insurance concept. However, in budget deals aimed at cutting federal costs in 2011 and 2013, Congress ended up taking away most of that money, leaving the co-ops with little more than the roughly $2 billion that was allocated in the two years after the PPACA was approved.
Co-op leaders have accused the insurance industry of engineering the budget cuts as a way to kill off competition.
Although there have been some successes, 12 of the 23 co-ops have failed. Part of the problem may have been consumers skeptical or unfamiliar with the new model.
In its first year of operation, Meritus only attracted 2,400 enrollees, far short of its stated goals. However, in August 2015, it announced its enrollment had skyrocketed to 59,000, a change it attributed to lowering its premiums. The news was a dramatic comeback story as well as vindication for the co-op model. Now it appears that Meritus could not afford the lower premiums that were necessary to attract the new enrollees.
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