Troubled ACA CoOp Suspends Agent Commissions

Recent developments regarding health insurance Co-Ops established under the Affordable Care Act (ACA) appear to be encountering financial difficulties, which could be of significant concern to NAIFA members and their clients. One particular Co-Op in Iowa, which was heading towards insolvency, has had all agent commission payments suspended by the Iowa insurance department.
 
ACA Co-Ops are designed to be private non-profit insurers which underwrite ACA-compliant plans and are entities owned by their policyholders. Co-Ops are subject to all state insurance licensing requirements and financial standards. They are intended to compete in the individual and small group health insurance markets and are eligible to receive federal loans to finance start-up costs.  However, many are lacking necessary operating capital due to a cut in federally authorized loans, low pricing of policies, and unexpectedly high number of claims. 
 
According to a study from A.M. Best and reported by CNBC, all but one of the two dozen Co-Ops suffered losses in the third quarter of 2014. The A.M. Best study further noted that the aggregate losses among the Co-Ops totaled approximately $244 million last quarter. 
 
Late last year, Iowa insurance regulators discovered that the Iowa Co-Op, CoOportunity Health, which has approximately 120,000 enrollees throughout Iowa and Nebraska, was heading toward insolvency.  The Iowa Co-Op has been in rehabilitation under the control of the Iowa Insurance Division (IID) since December 2014 and is likely to move into the liquidation phase by the end of February. Last week, the Iowa Commissioner filed a request in IA District court to obtain a liquidation order – which likely will be granted and would become effective as of February 28.  The Commissioner concluded it is impossible to save the company. According to the IID, the CoOp has about $13 million in cash and invested assets, but about $150 million in costs and liabilities. CoOpportunity Health is the first ACA cooperative to fail, and according to a report from the Des Moines Register, marks the first time in 26 years that the IDD has had to take control of a failed insurance company.
 
Although the Iowa Co-Op is no longer writing new policies, it will continue to serve existing policies and pay claims which will be paid through the Guaranty Associations in Iowa and Nebraska. Yet, in a troubling development for agents and brokers, despite the continuation in policyholder service, the IID determined that as part of the rehabilitation process, commission payments to agents would be suspended. In a meeting with the Iowa department, representatives from NAIFA and other agent associations raised concerns about the IID’s determination.    
 
Separately, members of Congress are now questioning the oversight of ACA Co-Ops and may look to investigate if federal regulators are effectively monitoring these entities. Sen. Charles Grassley (R-IA) sent a letter to HHS requesting that officials maintain any and all records related to the Iowa Co-OP. 
     
 NAIFA advises the Federation to be on the lookout for Co-Ops in their state that appear to be headed towards rehabilitation or liquidation. NAIFA is recommending meetings with appropriate regulators to make the case for the continued payment of agent commissions so that agents will be fairly compensated for services already provided and to enable them to continue to assist their clients.

NAIFA will continue to track this issue for NAIFA members, and encourages all members to perform due diligence when evaluating if a Co-Op plan would be the best choice for clients who qualify. 


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