PHOENIX — Executives with Arizona’s nonprofit health insurance co-op said Thursday they are working to regain the right to sell new policies and renew existing ones by proving to regulators that the company has enough money to operate next year.
The effort by Meritus Health Partners comes after it was suspended from selling insurance by the state Department of Insurance last week and its policies pulled from the federal health insurance marketplace by the Centers for Medicare and Medicaid Services, known as CMS.
Meritus CEO Tom Zumtobel said the Tempe, Arizona-based company disputes the department’s conclusion that it is at risk, but it is working to get additional financial backing to convince regulators it can survive financially anyway.
The company has a self-imposed Dec. 1 deadline to either secure approval to keep operating or shut down.
“Our timeline is short,” Zumtobel said. “We still believe we still have a chance to serve our members.”
Department of Insurance Director Andy Tobin said the department is concerned that Meritus could fail next year and leave its 59,000 current Arizona customers without coverage.
“If they’ve got something that pulls them out, that’s fine. But you don’t have CMS picking up the phone saying, ‘Hey, these guys are great,’” Tobin said. “They took them off the exchange.”
Meritus is one of 23 co-ops set up as part of a compromise in the Affordable Care Act to compete with for-profit insurance companies. But the co-ops have struggled, and Arizona’s became the 11th to stop selling policies or outright fail.
Meritus was started with a $93 million federal loan, of which about $20 million was for startup costs and the rest for reserves.
Zumtobel said the company has $33 million in cash on hand, and the Department of Insurance is holding $4 million it required the insurer to deposit when it was placed under supervision.
The company said it meets state solvency requirements, and it was suspended at Tobin’s discretion. Still, it knew there were concerns and has been working to secure additional backing to show regulators their survival is certain.
“There’s actually multiple options, and if we hadn’t started the ball rolling we would be crazy to be believing it’s a possibility,” Zumtobel said. “But we have a little traction and believe it can happen.”
Tobin said he could not risk allowing the company to sell policies next year when its finances appeared shaky. The company said it was losing $2 million a month, but Tobin said that number was higher in September.
“I guess you could argue there’s certainly a chance that they could make it into some portion of ’16 with better claims, but there’s nobody that’s telling me they can make it through ’16,” Tobin said. “So do we want to end up in April or May or June or August in receivership, and then what do we do with their insureds?”
The company is continuing to service policies and pay provider bills.
Tobin, a former Arizona House speaker, is an opponent of President Barack Obama’s health care overhaul law, as is his boss, Republican Gov. Doug Ducey. But he said that opposition had nothing to do with his decision.
“The president doesn’t need Andy Tobin to make Obamacare look worse,” Tobin said. “And I would say that if we were not doing the right thing CMS would be screaming about Arizona all over national TV.”
Meritus had a slow start in the marketplace, enrolling just over 2,600 people in 2014, its first year of operation. But that number soared this year, when it lowered rates to become more competitive. It sells in all 15 Arizona counties, but the majority of its customers are in Maricopa, Pima and Mohave counties.
About 154,000 Arizonans paid for individual policies bought on the federal marketplace as of June 30, and Meritus has more than 30 percent of those policies.