Illinois co-op will shut down, leaving 49,000 looking for new coverage

Only seven of the original 23 health insurance co-ops set up by the Affordable Care Act will still be in operation, as Illinois’ Land of Lincoln Health (LLH) becomes the latest to close over risk adjustment payments.

The co-op, which covers 49,000 people in the state, owes $31.8 million under the risk adjustment program, one of several within the ACA designed to stabilize premiums. Other co-ops have been faced with similarly large bills, leading Maryland’s Evergreen co-op to sue the federal government, claiming the program unfairly benefits larger, older insurers.

When the latest risk-adjustment data was released by CMS in June, the Illinois Department of Insurance took the unusual step of issuing an order blocking LLH from making the payment, arguing it would cause a mid-year liquidation.

The department said on June 12 that CMS wouldn’t allow the suspension of the payment, leading the department to request the mid-year closure it had hoped to avoid.

“If the Cook County Circuit Court enters an Order of Rehabilitation, LLH will temporarily continue to operate under the director’s supervision,” the department said. “LLH will continue paying policyholder claims, while the director works with CMS to establish a 60-day special enrollment period for LLH’s policyholders to obtain new healthcare policies and prepares the company for liquidation.”

The department referred back to its earlier order, saying the federal government owes LLH approximately $70 million under the ACA’s risk-corridor program. Citing a lack of an appropriation from Congress, HHS has only paid 12 percent of what insurers had requested under the program.

The co-op has struggled since launching in 2014, along with other nonprofit insurers that took advantage of billions in available federal loans provided by the ACA. LLH reportedly lost $90 million last year and an additional $17 million through May of this year.

Similar stories have played out with other state’s co-ops. Oregon’s Health Co-Op had announced its liquidation just two days prior to LLH, also placing the blame on risk adjustment payments. Healthy CT, Connecticut’s co-op, has been placed under supervision for the financial strain caused by the same program.