State’s directive shutting down Health Republic insurance co-op will affect ‘hundreds and hundreds’ across region

Hundreds of North Fork residents find themselves unexpectedly in need of a new health insurance plan come the first of the year.

Health Republic, a nonprofit health insurance cooperative that opened in 2013, has been ordered to stop writing new policies and wind down its business after existing polices expire, the New York State Department of Financial Services said in a press release Friday. Existing individual policies, which were purchased through the state health insurance exchange, will remain in effect until the end of the calendar year.

The fate of small group policies privately purchased by businesses remains uncertain — for now. State regulators will “evaluate the best course of action with regard to small group plans” and will announce their decision “with appropriate notice to help provide a transition period to new coverage and protect policyholders,” the insurance cooperative said.

More than 200,000 New Yorkers are currently insured through Health Republic, according to the state agency. “Hundreds and hundreds” of them are residents of Riverhead and Southold, said said Karl Washwick of the Washwick Insurance Agency in Riverhead, which specializes in small business health insurance coverage.

“Health Republic was the carrier d’jour because it was about 20 percent cheaper than any other plan because of federal subsidies,” Washwick said in an interview today.

The state recently granted Health Republic a 20-percent rate increase for 2016, Washwick noted. But regulators decided that wasn’t enough to allow the new cooperative to remain solvent and ordered it to wind down its affairs.

“Starting a new insurance company is a daunting task in any environment, but the systemic challenges placed on us by the structure of the CO-OP program were simply too difficult to overcome,” Health Republic CEO Debra Friedman said in a letter to members posted on the cooperative’s website.

While Health Republic insurance plans will continue in effect through the end of 2015 and health care providers will remain bound by their contracts to honor the policy, Washwick said he is concerned about the provider network holding up. He recalled that when MDNY, a health insurance company that catered to small businesses, went out of business due to insolvency nearly a decade ago, “a lot of doctors got burnt — they’re the last in line.”

If providers break their contracts with the insurer that goes belly up, “who’s going to sue to enforce the contract?” Washwick asked.

There will be some 16 health insurers for individuals on the N.Y. health insurance exchange next year, according to the Department of Financial Services.

“The ideal thing would be for an employer to be able to pay the employee for the cost of the premium and let him go to the exchange and purchase individual coverage,” Washwick said. But an employer obligated to provide health insurance under the Affordable Care Act can’t do that, Washwick said. There are $100-per-day penalties associated with failing to provide health insurance coverage for employees.

Small group options will be limited to four, Washwick said: Empire, Oxford, Aetna and Care Connect.

Care Connect is a plan founded in 2013 by the North Shore-LIJ Health System. It is very affordable, Washwick said. But participating hospitals are generally limited to those in the North Shore-LIJ Health System.

While the North Shore-LIJ Health System is the largest in the state, with 22 member hospitals including, as of January, Peconic Bay Medical Center in Riverhead, other hospitals on Long Island that are not members of the North Shore-LIJ system — including Eastern Long Island Hospital in Greenport, Southampton Hospital, Mather Hospital, Brookhaven Memorial, Stony Brook University Hospital and the Catholic hospitals — are not in-network providers under Care Connect coverage. The large NYC hospitals such as NYU, New York-Presbyterian, Mount Sinai or Memorial Sloan Kettering are also not participating providers. See full list here.

ELIH and Southampton chose to affiliate with Stony Brook, while Peconic Bay Medical Center decided to become part of the North Shore-LIJ system.

North Shore’s insurance plan was a factor in PBMC’s decision to merge with North Shore-LIJ rather than Stony Brook, said PBMC president and CEO Andrew Mitchell. “It offers a high-quality, low-cost solution to a lot of individuals and the small businesses,” he said, noting that the health insurance market on the East End consists mostly of individuals and small businesses.

“The Care Connect product will have a very robust network and I’m told it will have the lowest premium on Long Island,” Mitchell said. “I think it will be a terrific solution,” he said. “We will be setting up meetings with the brokers and doctors.”

ELIH president and CEO Paul Connor said he doesn’t think the demise of Health Republic will have a large impact on either the Greenport hospital or many of its patients because commercial insurers cover a minority of the hospital’s patients.

“Our payer profile is mostly Medicare and Medicaid,” Connor said.

The next health insurance open enrollment period begins Nov. 1.