The collapse of Health Republic Insurance of New York earlier this year can be blamed on “an apparent breakdown in state oversight,” according to a report released Tuesday by Empire Center, an independent think tank.
In November, the state Department of Financial Services ordered the shutdown of Health Republic, disrupting coverage for 215,000 members, and leaving hospitals and doctors scrambling to get their bills paid. About 12,000 of those customers live in Orange, Sullivan and Ulster counties.
Health Republic was a nonprofit insurance co-op created under the Affordable Care Act.
The Empire Center’s report said that, although the insurance company had shown steep operating losses and mounting debt, the state did not step in to order higher insurance premiums. Rather, the state cut the premiums repeatedly, exacerbating the co-op’s losses.
A spokesman for the Department of Financial services declined to comment, saying that an investigation is ongoing.
The Empire Center report asks whether the political desire to keep health insurance premiums artificially low in the short term clouded the department’s judgment.
There was an “inherent conflict between the department’s longstanding regulatory role – which is to assure that health plans are financially sound – and rate-setting authority granted by the legislature in 2010,” according to the report.
That law, which gives the agency authority to approve individual and small business insurance premiums in advance, had no impact on New York’s health insurance cost in comparison to national averages.
“This suggests that consumers might be better off if DFS kept its entire regulatory focus on the financial health of insurance companies while leaving price-setting to market forces,” Empire Center said in a statement.