Officials: Hospitals, doctors owed $200M over failed insurer

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ALBANY, N.Y. (AP) — Hospitals and doctors told New York senators Wednesday they've got $200 million or more in unpaid bills because of last year's financial failure of the insurance cooperative Health Republic, and they want the state to step in.

Other insurers and care providers who met at the Capitol also questioned the state Department of Financial Services' methods for setting insurance rates lower than Health Republic had requested and obviously needed.

Health Republic had about 200,000 members enrolled through New York's health exchange when it went under. State regulators automatically enrolled about half with other insurers who agreed to take them in November, and the rest were small group insurance plans that had to find other coverage.

"We'll see if the governor's going to do anything with regard to making up the immense shortfalls. That would be a part of the budget process," Senate Health Committee Chairman Kemp Hannon said afterward.

Senate Insurance Committee Chairman James Seward said he'll again advance legislation to make the insurance rate-setting process more transparent.

The DFS has an ongoing investigation. A restructuring firm installed at Health Republic is still determining the total amount of unpaid claims after all offsets are applied, said Richard Azzopardi, spokesman for the governor. "Once this analysis is completed, we'll evaluate what, if any, steps are appropriate to take," he said.

The Greater New York Hospital Association proposed that the state establish a guaranty fund, which is financed by a temporary assessment on other insurers when a health plan becomes insolvent, that could retroactively pay bills and protect hospitals and patients. New York is the only state without such a fund, said association Senior Vice President Kathleen Shore.

An association survey found Health Republic owed hospitals as much as $165 million through October, a number that was expected to rise "significantly."

Dr. Joseph Maldonado, president of the Medical Society of the State of New York, said many physician practices that took a financial hit are small and stretched to weather it. Health Republic is the 12th insurance plan nationally to go bankrupt, and the society told state officials a year before it failed about issues getting paid, he said.

New York State Conference of Blue Cross and Blue Shield Plans opposed establishing a guaranty fund. "It is nothing more than an after-the-fact tax on consumers who purchase coverage," said spokeswoman Deborah Fasser.

David Anderson, chief executive of Buffalo-based HealthNow New York, said that as a nonprofit without deep reserves, his organization needs state-set rates to be accurate. He backed using medical loss ratio, which requires insurers to spend at least 80 percent of premium dollars on medical care and not overhead, instead of prior DFS approval of rates.

Troy Oechsner, special assistant to the DFS superintendent, said that Health Republic's insurance rates were certified by its actuaries, but some issues like subsequent cuts in federal support were not foreseeable in 2014. Insurer solvency is at the core of what regulators do, he said. "We feel we did the right thing at the time given the uncertainty."

Donna Frescatore, executive director of the state health exchange, acknowledged state officials have pushed for affordable premiums and that the New York has reduced its rate of uninsured residents to less than 6 percent.

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