HealthyCT Order of Supervision Frequently Asked Questions
On July 1, 2016, Connecticut Insurance Commissioner Katharine L. Wade issued an Order of Supervision to HealthyCT, the State’s Non-Profit Health Care Co-Op. A copy of the Order has been posted to the CID website on the Orders & Decisions page.
What is an order of supervision?
Under Connecticut law, the Connecticut Insurance Department (“CID”) has a range of steps it can take in order to protect the interests of an insurer’s policyholders and claimants. One available option when the Commissioner determines that a domestic insurer’s financial condition is deteriorating is an order of supervision, under which the responsibility for most day-to-day operations remains with the insurer’s management and Board, but with a number of specified actions being either prohibited outright or made subject to the Commissioner’s prior approval. Most importantly in this case, the HealthyCT Order prevents the company from writing any new policies and also from renewing any policy that expire after July 1, 2016.
What does the Order mean for:
HealthyCT’s existing subscribers/members: With the sole exception of near-term renewals (August 1 and beyond), the Order has no immediate impact. Individual policyholders with an existing HealthyCT contract will have no change whatsoever in their coverage, claims handling, customer service or other interactions with the company. In fact, Commissioner Wade’s whole purpose in issuing the Order and assuming the supervisory role is to prevent any adverse impact on coverage, claims payments and customer service.
Therefore, you should continue to see your doctors or other providers in the ordinary course, and continue to fill prescriptions. You must, however, also continue to pay your premiums when due in order to keep coverage in place through the expiration of your policy.
All such policyholders should be aware of the need to seek replacement coverage when their current contract expires.
Group plans with near-term expiring policies that have received a quotation for new / renewal HealthyCT coverage to commence within the next several months:
IMPORTANT: Note that under the Order, policies that became effective July 1, 2016 will remain in effect until June 30, 2017. However, HealthyCT cannot bind policies which were to commence August 1, 2016 or later, whether or not such coverage has already been quoted. Such quotes are no longer valid. Therefore, it is vital that if you were expecting a HealthyCT policy to commence in the near future you must contact your broker immediately to secure replacement coverage. The Commissioner and CID staff have reached out to the other companies writing that business and alternative coverage will be available to replace the HealthyCT quoted policies.
Medical providers: Again, providers should expect to see no change whatsoever while HealthyCT is operating under the Order of Supervision. Claims will continue to be processed in the ordinary course in accordance with the policy terms and conditions.
Employees: HealthyCT employees should discuss with their supervisors any change which may result from the Order of Supervision with respect to their duties. In the large majority of cases, it is the CID’s expectation that the Order will not affect company employees in the performance of their jobs.
Vendors: Vendors and other persons providing products or services to HealthyCT should contact their company contact for information. Insurance Department personnel will not be able to answer inquiries concerning vendor contracts.
What does “run-off” mean:
Policyholders, employees or others may hear or see the term “run-off” in this connection, a term used in Paragraph 16 of the Order. An insurance company in “run-off” simply means that no new or renewal policy obligations are being created and that the company is being operated so as to assure that all obligations are being taken care of as the company’s existing portfolio of policy contracts ‘runs off’ over time.
What is the Insurance Department’s role now?
The role of the Department’s Financial Regulation staff now, as it has been for many months, is to continue to work with HealthyCT’s senior management and staff to closely monitor the capital and liquidity levels and operating expenses, all with a view to protecting the interests of the company’s contract parties – most importantly, the policyholders and providers. In that regard, the Department has senior examinations staff on site in Wallingford daily to monitor the company and alert the Commissioner to any concerns.
Under the order, the Commissioner receives detailed periodic reports from the company and must pre-approve any company action which is out of the ordinary course.
What is the future for HealthyCT as an organization?
The Order contains a provision allowing for a possible future abatement of the supervisory status and a return to normal course operations. Whether circumstances will ultimately permit such abatement is, of course, unknowable. Given what we do know as of July 2016, however, it is recommended that group and individual insureds, medical providers and others not count on a near-term change in circumstances which would justify an abatement of the Order.
Why is this happening now to Healthy CT; what factors led to the Commissioner’s order?
The survival rate for CO-Ops formed in the various states following adoption of the ACA has been low, with a number factors contributing to the lack of success. One significant hurdle these start-ups have encountered has been the manner in which the federal government has administered the “risk adjustment transfer” program, under which health insurers annually pay or receive funding depending on the assessed riskiness of their insured populations. Commissioner Wade and her staff have expressed their concerns to federal authorities over the risk adjustment formula and its potentially damaging effects on the market, particularly its impact on small insurers like HealthyCT. Together with her fellow regulators, Commissioner Wade has personally met with HHS Secretary Burwell to seek a more workable market stabilization mechanism. Unfortunately, the federal Center for Medicare and Medicaid Services (“CMS”) has declined to modify its approach for the 2017 plan year. On June 30th, CMS published its listing of 2015 risk adjustment program transfers
, and the $13.4 million risk adjustment which HealthyCT is obligated to pay – when paired with a previous federal decision to withhold payments to companies under a related program known as the “risk corridor ” – created a level of financial stress for HealthyCT which necessitated the Commissioner’s order.
Will other health insurers in the State be under similar financial stress? Will they be able to meet the needs of subscribers who cannot obtain HealthyCT coverage?
CID closely monitors the financial health of all companies conducting the business of insurance in Connecticut, so as to ensure that claims are able to be paid fully and timely. At this time, the Department does not have reason to believe that the capital and liquidity stresses created by the risk adjustment transfers are such as to require Departmental action with respect to any other company. Further, the Department is confident that the State’s other health insurance writers can absorb the flow of new business resulting from the Order placing HealthyCT into run-off.