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Arizona’s health insurance co-op Meritus fights closing

Executives with Arizona’s health insurance co-op are attempting to convince the Arizona Department of Insurance’s director to reverse an order that effectively put the non-profit out of business.

The Arizona Department of Insurance issued an order of supervision last week for Meritus, a co-op established with more than $93 million in federal loans under the Affordable Care Act.

The state’s order means Meritus can’t issue new health insurance policies or renew existing ones and must pay claims on behalf of 59,000 policyholders for services through the end of the year.  The Centers for Medicare and Medicaid Services removed Meritus from the federal marketplace, Healthcare.gov, before the three-month enrollment period began Sunday.

Executives with Meritus met with Gov. Doug Ducey’s staff Wednesday and hope to renew talks with Arizona Department of Insurance Director Andy Tobin. Their pitch: The co-op is financially solvent and will make it through 2016.

“We need to get him this information so he is comfortable,” Meritus CEO Tom Zumtobel said. “Right now, he is not comfortable that we are a good risk for the community.”

Tobin said Thursday that he is not inclined to change the order of supervision.

“My thoughts are all about the providers and policyholders,” said Tobin, a former state lawmaker appointed last month to serve as ADOI director. “This is all about, can they make it through 2016?”

Tobin said he has been in  talks with the Centers for Medicare and Medicaid Services but it was his decision to pursue the order of supervision. He said Meritus recorded a loss of more than $4 million in September and he did not believe the co-op had enough cash to continue to pay claims through next year.

“The September month was the final trigger,” Tobin said. “They told my staff that it was a bad month, but I couldn’t find a good one.”

Meritus said this week that it has $30 million available for claims and has transferred $4 million to the Department of Insurance as a hedge for existing customers.

Meritus officials said the co-op could stay operational if the state reversed its position and the federal government allowed Meritus back on the marketplace by Dec. 1.  Meritus customers must choose a plan by Dec. 15 to guarantee coverage as of Jan. 1, according to the Centers for Medicare and Medicaid Services.

The Department of Insurance required Meritus to mail letters to customers informing them that they must select a replacement plan. Customers who received federal subsidies that offset monthly premiums must choose a new plan through the federal marketplace for subsidized coverage.

Those who want help selecting a plan can visit www.coveraz.org to make an appointment for in-person assistance.

Meritus has a network agreement with Maricopa Integrated Health System that provides health coverage for more than 30,000 people. A MIHS spokesman said that the county health system’s priority is to ensure Meritus-insured patients get care as needed.

Before the plan was removed from the federal marketplace for the current enrollment season, Meritus offered the least expensive plan in Pinal and Mohave counties and was the fourth-least-expensive plan in Maricopa County.

During the 2014-15 enrollment period, the co-op slashed plan prices to become the lowest-cost provider in Arizona’s largest counties. Meritus initially had planned to keep rate increases at less than 10 percent during the current enrollment period from Nov. 1 through Jan. 31, 2016, but it raised those rates after the Department of Insurance warned of lower payments from the federal “risk corridor” program.

The risk corridor is one of three federal programs designed to stabilize rates during the first three years of the Affordable Care Act marketplace. There have been a rash of recent co-op failures across the country, with many citing the lower risk-corridor payments as a factor.

The Centers for Medicare and Medicaid Services also has increased oversight of co-ops to avoid disruptions for consumers and providers should a co-op fail in mid-year.

On Tuesday, a non-profit in Michigan became the 12th of 23 co-ops to announce plans to close. Co-ops in Colorado, Kentucky, Louisiana, Nevada, New York, Oregon, South Carolina and Tennessee also have announced plans to shut down. In February, a co-op that served Iowa and Nebraska became the first to close.

Tobin said he does not know how much money the federal government would be able to recover from Meritus to repay loans. He said his department would need to ensure that providers get paid for all claims, even those that are submitted in early 2016 for services performed before the end of this year.

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