SALT LAKE CITY (AP) — A nonprofit Utah health insurer created by the federal health care law will shut its doors after learning it would receive only a fraction of the U.S. money it was counting on, state insurance regulators said.
Arches Mutual Insurance Co. will keep paying claims for its customers this year but will halt operations in 2016 because it doesn’t have enough money to meet its obligations, Utah’s Insurance Department said Tuesday.
Arches is one of 23 insurance cooperatives created by President Barack Obama’s health law. Almost all of the co-ops have struggled with financial losses, and Utah’s is the 10th to shut down.
The company expected $14 million this year from a federal program designed to offset insurers’ losses, Arches spokeswoman Tricia Schumann said Wednesday. But the federal government announced this month that it would pay only about 13 percent of the requests made by insurers.
The company insures about 65,000 Utah residents, including about 30,000 who signed up for coverage through the federal online marketplace, healthcare.gov. The online exchanges, a key component of Obama’s law, allow people to shop for insurance and offer subsided plans for those who can’t afford coverage.
Arches had planned to offer policies for residents in each of Utah’s 29 counties next year, but its closure will leave 20 counties with only one other insurance company to choose from.
That could limit patients to plans that don’t have any in-network doctors or providers in their county, Todd Kiser, the commissioner of the Utah Insurance Department, said Wednesday.
The department is working with the federal government and other insurers to see if another company can offer plans in those counties, Kiser said.
A federal audit released earlier this year flagged the struggles of Arches and other co-ops, noting that almost all were in the red. They received $2.4 billion in taxpayer loans to get up and running under the health law.
Arches, which received about $94 million in startup loans, reported losing about $20 million last year.
CEO Shaun Greene said earlier this year that the company, like many other insurers, faced higher-than-expected costs when consumers signing up the first year were sicker and more expensive than projected.
The law set up a federal stabilization program to help insurers stay afloat amid the changing market. Insurers who had lower-than-expected costs were to pay into the program, and companies with higher-than-expected costs were supposed to get money from the fund.
But the U.S. Department of Health and Human Services announced Oct. 1 that it collected less than predicted and the program would pay only 12.6 percent of the $2.87 billion insurers were counting on.
Insurers expected the program may not be able to pay out requests in full, said Schumann, the Arches spokeswoman, but she did not know until this month how little would be coming.
“It was pretty shocking actually,” she said. “We weren’t expecting it to come in that low.”