Thursday, June 10, 2010

Color me skeptical: An InsureBlog Investigative Report (Conclusion)

Did ObamaCare© kill nHealth?

In Part 1, we learned that group health carrier nHealth believes itself to be the first corporate casualty of ObamaCare©, but that this may not be accurate. We also learned that there are more issues here than may be obvious to the casual reader, and attempted to identify them.

On the other hand, we were left with a number of unanswered questions, and we hate unanswered questions:

First up, I did hear back from the nice lady at the Virginia Department of Insurance [ed: actually, they call it the Bureau of Insurance, but we're sticking with "Department"], who had more insights into both the Guaranty Fund and the nature of the "wind down" of nHealth. For openers, the specific process here is called a "solvent runoff" (as opposed to what normally happens when a carrier hits the financial skids). The Department has been (or will be, it wasn't clear) in contact with the policyholders and agents. One thing that I was able to confirm is that nHealth's policyholders will not have recourse to the Guaranty Fund (that's important: we'll discuss why in a moment).

Second, my contact told me that a copy of "the order" would be sent to policyholders and agents, but I could find no such "order" anywhere on the Department's web page. I had also asked whether there were any "financial issues" that might be the cause of the shut-down (as opposed to anxiety over ObamaCare©), and was told that this was "confidential." That's bothersome: it seems to me that, although nHealth is (was?) a privately-held company, the actions of the Department of Insurance in this case are, by definition, a matter of public record.

Which brings us to the issue of the (non-)Guaranty Fund. In "normal" circumstances (e.g. bankruptcy), policyholders of the defunct carrier can access the state's life and health guarantee fund much as savers access the FDIC safety net. But that's not the case here: after 11:59PM on December 31st, any insureds on claim, and still covered by nHealth, will see their benefits closed off, with no recourse to, well, anything. The Guaranty Fund won't help, and the company will no longer exist. That has nothing to do with ObamaCare©, and everything to do with the apparently feckless folks who decided to voluntarily "shut it down."

Perhaps the most telling piece comes from this article in the Richmond (VA) Biz Sense:

"[nHealth co-founder Paul] Nezi and other investors helped fund the company out of the gate with a $12 million investment."

The article goes on the tell us that the nascent company has been unable to up that initial capitalization. The problem is that, given the existing marketplace, and the increasingly growing footprints of "the big boys," that $12 million proved woefully inadequate. Couple that with what appears to be a top-heavy administrative function (50 employees to service just 100 groups?), and you have a recipe for failure.

On the one hand, kudos to Nezi and company for at least trying to increase competition, and especially for focusing on consumer-centric health plans. But it seems to me that this attempt was doomed from the git-go; ObamaCare© may have been the final nail in the coffin, but that grave's been dug for quite a while.

Final answer: I call BS.
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