Health Care

Barred from selling Obamacare plans, Miami insurer to lay off employees

About 75,000 South Florida residents were covered under the Affordable Care Act by Preferred Medical Plan, a Coral Gables-based insurer. The company was barred from selling plans on the ACA exchange next year because it did not receive expected payments from the government. In this December 2014 photo, applicants line up outside a store in the Mall of the Americas as the deadline for enrollment neared.
About 75,000 South Florida residents were covered under the Affordable Care Act by Preferred Medical Plan, a Coral Gables-based insurer. The company was barred from selling plans on the ACA exchange next year because it did not receive expected payments from the government. In this December 2014 photo, applicants line up outside a store in the Mall of the Americas as the deadline for enrollment neared. Gaston De Cardenas

A Coral Gables-based health insurance company and dozens of its employees are the latest casualties of a Republican-led legislative gambit in 2014 to undermine the Affordable Care Act — a maneuver for which presidential hopeful and U.S. Sen. Marco Rubio of Florida has taken credit on the campaign trail.

Preferred Medical Plan filed notice on Wednesday that the private insurance company intends to lay off 162 employees in February, according to the Florida Department of Economic Opportunity.

The company will remain in business, said James Card, a spokesman. But Preferred Medical will cover a much smaller number of Floridians — in large part because of a significant reduction in payments that the company expected to receive under the health law.

“Preferred Medical was prohibited from participating on the 2016 [ACA] exchange,” Card said in a written statement.

The temporary Risk Corridors program was designed to protect Obamacare health plans from uncertainty in rate setting from 2014 to 2016 by having the government share risk in losses and gains.

The reason: the federal Centers for Medicare and Medicaid Services or CMS could not pay the health insurer what was promised in 2010 under the so-called Risk Corridor program., a risk-sharing arrangement that Rubio calls a taxpayer “bailout” of insurance companies.

Following Wednesday’s release of an appropriations bill that includes a measure to once again restrict payments to insurers in 2016, Rubio issued a press release that read, in part: “ObamaCare’s bailout provision has nothing to do with helping people access health insurance, but it has everything to do with how big businesses in this country game big government to increase their profits, and how big government games big businesses to increase government’s reach into our lives.”

The Risk Corridor is a temporary program created under the health law and designed to protect health insurance companies against the risk of covering patients who were too sick during the first three years of the ACA exchange, also known as Obamacare.

Since health insurers did not know enough about the people who would enroll for health insurance through the ACA exchange, and they had little to no data to help them set premiums, the health law envisioned the program would help the companies stay solvent as they adjusted their rates.

But the 2014 legislation championed by Rubio restricted the Obama administration's legal authority to make payments to insurers under the program.

As a result, CMS said in October that the government would pay only $362 million of $2.87 billion in claims for 2014, or about 12.6 percent of any health insurer’s expected payment — an announcement that led to the collapse of health insurance co-operatives in several states, and to the reduction of health insurance carriers participating in Obamacare.

The U.S. Department of Health and Human Services has said that the government will pay insurers the full amount of their claims in subsequent years.

75,000 Obamacare consumers in South Florida covered by Preferred Medical Plan in 2015

Rubio has touted the change as a political victory. In November, the Florida Republican drafted a letter to Congress claiming that he had saved taxpayers $2.5 billion and urging Congress to continue restricting the Risk Corridor program.

“It’s critical that Congress once again stand with taxpayers to stop any taxpayer-funded bailout of health insurers from happening,” Rubio wrote in the letter.

Preferred Medical said it worked with Florida insurance regulators, CMS and representatives in Washington, D.C., to remain on the ACA exchange.

However, according to the company’s press statement, “CMS has maintained its position that Preferred Medical Plan not be allowed to participate on the [ACA exchange] due to the funding shortfall created by CMS not paying the Risk Corridor payment.”

The result is that Floridians now have fewer carriers to choose from on the ACA exchange, which leaves consumers with fewer choices of insurers and which health economists say likely will lead to higher premiums.

So far we’ve succeeded in stopping the Obama Administration from bailing out health insurance companies under ObamaCare.

U.S. Sen. Marco Rubio of Florida

Preferred Medical offered coverage in 2014 and 2015 through the ACA exchange and through the state’s Medicaid managed-care program.

In total, the private insurance company enrolled about 100,000 Floridians in 2015 — nearly all of them in Miami-Dade, according to the Florida Office of Insurance Regulation’s quarterly managed care report.

But the company’s coverage reach has diminished dramatically since the summer. In August, Preferred Medical sold its Medicaid line of business to Molina Healthcare of Florida for $8.2 million, a transaction that involved the coverage of about 23,000 individuals.

An estimated 75,000 residents of Miami-Dade and Broward were covered under Preferred Medical’s Obamacare plans during the first half of 2015, according to state filings.

The company is not the only carrier leaving Florida. Cigna Health announced in October that the company would no longer offer coverage on the ACA exchange in the Sunshine State due to high costs associated with fraudulent substance-abuse treatment centers.

Florida insurance regulators issued an alert on Wednesday, urging consumers with Obamacare coverage through either Preferred Medical or Cigna Health to take action immediately and select another plan.

Because those insurers have left the ACA exchange, consumers covered under those plans will not be automatically re-enrolled in coverage. But HHS has extended the deadline to begin or renew ACA exchange coverage that begins on Jan. 1 until 11:59 p.m. PST on Thursday.

“A majority of these affected policyholders are located in the South Florida region,” according to the alert.

As of Dec. 12, CMS reported, about 835,000 Floridians had selected a plan through the ACA exchange — more than any of the 38 states using the federal platform at healthcare.gov.

Daniel Chang: 305-376-2012, @dchangmiami

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