Land Of Lincoln Health and ACA Update

On July 5th the Illinois Department of Insurance took actions to try and save the struggling nonprofit Affordable Care Act start up Land of Lincoln Health (LLH).  The department ordered LLH to stop renewing policies for large and small business, stop selling new plans unless authorized, and not to pay $31.8 million it owes
to risk adjustment. Risk adjustment is where the federal government takes money from insurers with low-risk enrollees and gives it to insurers with high-risk enrollees.  If LLH has to make that payment, it would almost guarantee them having to shut down.  Land of Lincoln will also stop writing individual policies.

There is only one way LLH may be able to survive, and that is riding on a $73 million lawsuit they filed against the federal government.  LLH filed suit claiming it was owed $73 million as a part of the risk corridor programs, a program that was established to try and help level the playing field for small insurance companies.  However, even if Land of Lincoln were to win and received the $73 million that money, based on projections we did at Better Business Planning and other insiders in the insurance industry have found that LLH would only be able to stay in business for another 6-8 months.

What does this mean to you?  Land of Lincoln leaving the insurance industry would only directly affect around 49,000 insured in Illinois.  It is still unsure of what will happen to groups covered under LLH.  It was originally thought that there would be a block transfer of groups from LLH to another insurance company, most likely Blue Cross Blue Shield. However, that does not look like it will be that case anymore.   There will also be many indirect consequences if the nonprofit CO-OP Land of Lincoln had to leave the marketplace.  One of the problems would be the so-called insurance exchange, where individuals can purchase insurance and see if they qualify for a subsidy would no longer be a true exchange.  LLH would mark the last insurance group to leave the exchange leaving only Blue Cross Blue Shield of IL as the only option you would have if you needed to buy individual coverage.  

For those of you not located in IL, you can expect to see the same trend follow throughout the other CO-OPs across the country.  The main issue is that the Affordable Care Act (ACA) tried to put every insurance company on a level playing field no matter their size.  That portion of the 
ACA up to this point has not worked and is making it hard for startup insurance carriers to try and compete with larger insurance carriers.  This issue caused many of the CO-OP startups to have to write riskier business ultimately causing them to pay out higher claims and not turning a profit.  As we find out more about Land of Lincoln Health and other CO-OPs across the nation, we will make sure to update you. 

To stay up to date with news about the Affordable Care Act or anything group benefits, visit us at BBP-DAC.com and make sure to like us on Facebook and follow us on Twitter and LinkedIn