The Kentucky Health Cooperative, a member-governed non-profit organization that is dedicated to making health insurance available for all Kentuckians, is going out of business according to a report from Central KY News.
The Kentucky Health is going out of business due to losing so much money and the U.S. Congress cutting its subsidies to insurers who wound up with a costlier group of policyholders under the federal health-reform law.
Central KY News adds that Kentucky Health officials were expecting the government to provide them with $77 million to cover the past and expected losses.
But the cooperative got only $9.7 million, not even enough to cover the losses last year, which is at $50 million, the most of any of the 22 cooperatives created with subsidies.
Central KY News adds that Glenn Jennings, who took over as CEO of Kentucky News in June, said the cooperative is on track to right its course.
"We were on track to reverse direction and begin operating in the black, and we expected this to come about in 2016," he said.
Kelly Crowe, the CEO of National Alliance of State Health Co-Ops, told Forbes that the wind down of Kentucky Health is due to the government cutting its subsidy.
"Today's news regarding the wind down of Kentucky Health Cooperative is a direct result of lower-than-promised risk corridor payments that were announced last week,"
Forbes adds that Kentucky Health joins the Health Republic Insurance of New York, CoOportunity Health in Iowa and Nebraska, the Louisiana Health Cooperative, and the Nevada Health Co-op who are all folding.
About 400,000 American citizens are being affected so far, with 51,000 coming from Kentucky Health.
Joe Smith, the chairman of the board of Kentucky Health, told the Central KY News that the cooperative asked and received rate increase with an average of 20 percent this year and an average of 25 percent on November 1, the enrollment period, to cover losses.
He adds, though, that when the federal government decided to cut its subsidy, they had no choice but to close.
Central KY News adds that Kentucky Health said they will meet their financial obligations to all the people it insures.
Smith said it was a requirement for the cooperative to have a reserve that is five times its premium income to cover for losses.
