Regulators pull one Obamacare option as open enrollment begins

The decision by state and federal officials to suspend Meritus’ operations means its customers will have to turn to one of eight remaining firms in the federal marketplace for 2016 health insurance. (Photo by Alex Proimos via flickr/Creative Commons)

WASHINGTON – Just as open enrollment for the third round of Obamacare was beginning this weekend, federal officials removed from the marketplace an insurance cooperative that had been providing coverage to about 59,000 Arizona residents.

Meritus – made up of Meritus Health Partners and Meritus Mutual Health Partners – was placed under “supervision” Friday by the Arizona Department of Insurance, prohibiting the company from signing new clients but letting it serve existing clients through the end of the year.

The federal government also suspended Meritus from offering plans on the federal exchange, which started its third enrollment period Sunday. There are still eight insurance companies operating in the federal marketplace in Arizona, from which Meritus’ current customers will now have to choose their 2016 coverage.

Executives at Meritus, the only cooperative operating in the Arizona marketplace, said the move by state and federal regulators caught them by surprise and that they are weighing their options.

“We were caught off guard by this extreme request based on our current and projected financial position,” Meritus CEO Tom Zumtobel said in a statement released Saturday.

“We have been working closely with the AZ DOI over the past few months to comply with all regulatory requirements and maintain sound financial accountability to the state,” he said in the statement.

It said Meritus is “currently reviewing all options available to continue to offer Arizonans affordable health insurance.” But if “the regulatory action taken by the AZ DOI is successful, Meritus must wind down operations and will not offer health insurance plans for 2016.”

Meritus said it was incorporated in December 2012 to provide “accessible and affordable health insurance coverage options to individuals, families and small businesses” under Obamacare’s Consumer Operated and Oriented Plan Program.

It got off to a rough start, with fewer than 900 of a projected 24,000 Arizonans signing up for 2014 coverage through the company, according to a report by the Department of Health and Human Services.

That number skyrocketed to about 59,000 this year, after the company lowered the cost of its plans ahead of the second enrollment cycle, Meritus said in its statement.

But Arizona insurance officials said the company had not made a profit since its inception and had already lost $78 million.

“At the end of the day, here’s where your big risk is,” Arizona Director of Insurance Andy Tobin said Monday. “This is not the only co-op that has problems.”

Tobin said 11 of 23 co-ops in states around the nation have now shut their doors.

Arizona Sens. John McCain and Jeff Flake, both Republicans, cited the latest action on Meritus as “yet another all-too-common reminder that the president’s health care experiment has failed.”

Their joint statement went on to say they are “gratified” by the actions Tobin took “to help ensure that Arizonans have some opportunity to find the new coverage they now need.”

Until the company decides how to respond to the order of supervision, Zumtobel said Meritus remains “focused on providing service to our current members and working with the DOI as well as the Centers for Medicare and Medicaid Services to reverse this regulatory action.”