Minuteman Health, which began in 2014 as a consumer operated and oriented plan under the Affordable Care Act, is organizing into a new company minus the co-op, Minuteman Insurance Company.
The goal is to facilitate a smooth transition of members as the new company stops writing business through Minuteman Health and starts selling plans as Minuteman Insurance Company, both on Jan. 1, 2018.
The co-op sells plans in Massachusetts and New Hampshire, growing membership to approximately 37,000 members.
[Also: Community Health Options, one of few remaining co-ops, backs out of New Hampshire]
Many ACA-formed co-ops have closed due to financial losses.
Minuteman Health said that while loss experience on its business has been favorable, the negative impact of the ACA-imposed risk adjustment program has been substantial.
"Forming Minuteman Insurance Company will allow the insurer to address numerous federal restrictions and work to make our coverage available to more people," said Minuteman Health CEO Tom Policelli.
The new entity will not be subject to co-op rules and therefore can take affirmative steps to mitigate the impact of the risk adjustment program.
Risk adjustment was intended to shift money from health insurers which have healthier members to health insurers who have less healthy members.
It has been difficult for insurers to predict their risk adjustment obligations, which has led some to withdraw from the ACA market, the company said. The program also unfairly penalizes issuers like MHI that are small, low cost, and experience high growth, it said.
"The significant negative impact from risk adjustment has been the principal driver of a reduction in MHI's surplus and capital over time," Minuteman said by statement. "In addition, MHI is subject to certain co-op rules that limits MHI's ability to adjust its business model to mitigate the impact of the dysfunctional risk adjustment program."
With the most recent risk adjustment information provided by the Centers for Medicare and Medicaid Services on June 16, and after consultation with its insurance regulators in Massachusetts and New Hampshire, MHI announced the change in its co-op status.
As an HMO, Minuteman Health partnered with low cost, high quality providers to offer affordable health insurance plans to customers and businesses. This will continue, according to the company.
The new entity has filed license applications in Massachusetts and New Hampshire and efforts to secure the capital needed are far advanced, the company said. The goal is to provide the same affordable coverage by working with the same select network of providers.
Existing policies will remain in effect for the rest of this year and claims under those policies will continue to be paid without interruption.
Twitter: @SusanJMorse