Health care providers face staggering losses in wake of insurance company’s demise, some fear for survival

The demise of Health Republic, the largest health insurance co-op created under Obamacare, will cost New York hospitals and physicians hundreds of millions of dollars if currently outstanding claims are not paid.

Peconic Bay Medical Center alone could lose more than $1 million if the failed insurance company does not pay outstanding claims or pay the hospital for services rendered through the end of this month.

Doctors are either reluctant to discuss how the shutdown of Health Republic by state regulators will impact them financially — or they just don’t know. Many doctors just don’t get too involved handling the business side of their practices.

But no one seems to know for sure how much, if anything, will be paid on outstanding claims.

A survey of nearly 800 N.Y. physicians conducted last week by the Medical Society of the State of New York found that more than 80 percent say Health Republic hasn’t provided them with clear information about the implications of the company’s shut down. And the insolvent insurance company owes N.Y. doctors “at least tens of millions of dollars,” the Medical Society said today. Forty-three percent of doctors statewide have outstanding claims to Health Republic— some in the millions of dollars.

A firm has been hired “to manage the wind-down” of Health Republic’s operations and the co-op’s financial consultants are hopeful that modest payments on outstanding claims may be made at some point in the future,” according New York’s deputy secretary for health and human services, Paul Francis.

Meanwhile, the state insists that providers remain legally obligated to continue to provide care to Health Republic subscribers and are prohibited by law from “balance billing” — holding subscribers responsible for amounts unpaid by the insurance carrier.

Complicating matters further is the unclear status of Health Republic’s provider network, which has patients, doctors and hospitals all wondering whether Health Republic’s subscribers actually have health insurance through the end of this month, when the insurance carrier shuts down as ordered by the state.

Health Republic was the largest of 23 nonprofit co-ops (“consumer operated and oriented plans”) established under Obamacare in 2014 to increase competition and provide more affordable health insurance. The federal government backed the co-ops with $2 billion in loans. So far, nine of the 23 — including Health Republic— have failed.

Health Republic established a robust provider network by entering a contract with MagnaCare, an existing traditional insurance company doing business in New York and New Jersey.

But after the state Department of Financial Services deemed the co-op insolvent and on Sept. 25 announced it had ordered Health Republic to cease writing new policies on Dec. 31, MagnaCare, whose participating providers were seeing their unpaid claims mount, terminated its contract with Health Republic on Oct. 19, effective Nov. 18.

On Nov. 6, MagnaCare informed its participating providers that “all claim payments will cease immediately,” as per a Nov. 5 letter from Francis to MagnaCare CEO Joseph Berado.

The health official’s letter “also sets forth the State’s position on a provider’s obligation to comply with NY state laws regarding balance billing of members and continuity or transition of care,” MagnaCare said in its Nov. 6 letter to providers.

“The State has directed MagnaCare to keep this network in place until the end of November,” Berado wrote.

Some doctors fearing payment of “pennies on the dollar” are telling patients they must pay for services out-of-pocket, according to reports RiverheadLOCAL has collected from six different Health Republic customers — including one who has seen the same Nassau County physician for more than 20 years.

Others say they will continue to provide care, even though they know they won’t be paid for it.

“Many of the practitioners are out a lot of money,” Riverhead pulmonologist Dr. Rajesh Patel said. “I will just go ahead and see them. If I don’t get paid, I don’t get paid,” he said. “What else can I do? They are my patients.”

Internist Dr. John O’Connor, who owns North Shore Medical Care in Calverton, echoed Patel’s sentiments.

“What can you do? Say no? I can’t do that as a human being,” O’Connor said in an interview Monday night. “You have to do the right thing.”

As a primary care provider, O’Connor said he is already stretched to the max financially and fears the demise of Health Republic, which will cost his practice a significant amount of money, will be the straw that breaks the camel’s back.

“There will be no guys like me left when all is said and done,” he said. “Since the new year, there have been 20 physicians that I know of that have left the area in a 25-mile radius. A few more guys are waiting to go.”

A few years ago, when a government computer error put his name in the Medicare provider database three times — “I’ve been practicing in the same place with the same name for 15 years” — his reimbursements were frozen for six months, while the government fixed their mistake.

“I had to borrow $40,000 to stay afloat,” he said. “I still haven’t been able to pay it back.”

He finds himself putting money from his personal savings into the business to make payroll.

He’s also worried he’ll need to increase his payroll to be able to meet new medical coding requirements — there are 76,000 new billing codes, he said. “Do it wrong, you don’t get paid. Worse, you will be fined. I’ll have to hire someone just to take care of that. And I can’t afford it.”

Every new year brings with it the need for more financial juggling, as Medicare deductibles have to be paid before reimbursements come in. That regularly requires hitting the business line of credit during the first three months of the year. Not in 2016.

“Banks have erased all lines of credit for physicians,” O’Connor said. “If I don’t get paid for Health Republic, I’m afraid I’ll be out of business,” he said, obviously distraught.

“Do you know what that feels like?” asked O’Connor, who is the father of two young children.

“This was an epic fail. You could predict this,” he said. “And this is just the beginning.”