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Kentucky Health Insurance Co-op Lost $50.4 Million, Most in U.S.


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Kentucky Health Insurance Co-op Lost $50.4 Million, Most in U.S.
KENTUCKY (8/8/15) — A federal audit of the non-profit health insurance companies formed under federal health reform found that at the end of 2014, all but one were operating at a loss, and the Kentucky Health Cooperative had the greatest loss, $50.4 million, but the lowest administrative costs.

The co-op chair and spokeswoman blamed the loss on an enrollment that was 183 percent higher than expected in 2014, its first year of operation. As of Dec. 31, its enrollment was 56,680; it had projected to enroll 30,929 by that date. The co-op sold three-fourths of the federally subsidized insurance policies sold on Kynect, the state health-insurance exchange.

The larger enrollment forced the co-op to put more money in its solvency fund to cover possible claims, under rules of the federal Centers for Medicare and Medicaid Services, co-op Chair Joseph E. Smith said in an interview.

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“We had to set aside money, and money is what you use to pay the bills with,” said Smith, whose main job is executive director of the Kentucky Primary Care Association. He said CMS rules require co-ops “to set aside 500 percent of the premiums,” while “Most commercial products have a 200 percent requirement.”

Another cause of the loss was that medical claims exceeded the premiums paid. Co-op spokeswoman Susan Dunlap said much of the higher-than-projected enrollment came from the sickest population in Kentucky, and many of them bought a top-level “platinum” policy, which pays 90 percent of claims and limits a patient’s out-of-pocket expense to $500. Kynect has four levels of policies that qualify for federal premium subsidies.

“Of the 29 percent of the formerly insured who were in the high-risk pool who transitioned to a qualified health plan, Kentucky Health Cooperative attracted 93 percent of that number,” Dunlap said in a telephone interview. “Those in the high-risk pool tend to be a sicker population and couldn’t get coverage before the Affordable Care Act.”


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