Thursday, June 20, 2013

The O - H - I.O.U.

Under the Patient Protection and Affordable Care Act a new type of insurance issuer called a CO-OP must be created in every state. These CO-OPs are high-risk ventures: the Office of Budget and Management has projected a default rate for them as high as 43%. Through 2012 over $2 Billion had been distributed by HHS to these start up insurers. 

Last week Mike wrote an excellent post on one of them in New York which you can read here.

This week the Buckeye state announced their list of insurers seeking to play in the CO-OP sandbox. The list includedAetna (Individual only), AultCare, Community (Anthem), Coordinated Health Mutual, Coventry (Individual only), Kaiser Foundation Health Plan (Small Group only), Medical Health Insuring Corporation of OH (MMO), and Summa.

While there may be additional companies announced later, the one that really stands out is a company that may be unfamiliar to agents and consumers, new kid on the block, Coordinated Health Mutual. They are a CO-OP who received a federal grant for $129,225,604 in late 2012. Coordinated Health Plans of Ohio is sponsored by Community Health Solutions of America LLC, which also runs primary care medical homes for state Medicaid programs.

Sounds innocent enough right? Lets connect some dots:

According to filings, Brett Baby, CEO of Coordinated Health, and Community Health Solutions (CHS) of America LLC CEO, Dale F. Schmidt have troubled histories. Baby was the former CEO of Physicians Insurance Company of Ohio. They made it an entire year before going under when regulators shut them down for dropping $5 million in reserves. Schmidt has a longer history including chapter 11 bankruptcy filings in 2006 (including CHS), a 2011 Medicaid overpayment in South Carolina to his firm for $10 million, and back taxes owed in 2012 to the state of Kentucky.

Brett and Dale are just the type of high quality financial gurus we want running an insurance company.

What's most disturbing about the entire CO-OP process is that despite these risks and questionable backgrounds CMS refuses to answer questions about how recipients are chosen or any other information about the program. President Obama and Secretary Sebelius have asked for transparency in health care pricing. Evidently it's too much to ask of them to have transparency in health insurance regulation.
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