Consumers generally like to save money when making purchases, whether it's a car, airline tickets or health insurance policies.
The pending demise of Health Republic Insurance of New York is an example of too much of a good thing: Premiums were so low that regulatory officials are closing down the insurance co-op.
The New York State Department of Financial Services announced the shutdown last month, affecting approximately 215,000 residents of the state.
The insurer racked up losses of more than $125 million since 2014, a result of the unusually low premiums it charged for Affordable Care Act (popularly known as "Obamacare") Marketplace health policies.
The insurer was slapped with a $80.2 million risk adjustment charge earlier this year, because regulators determined that its members were healthier or younger than average.
It also failed to receive the full $147 million it anticipated from the ACA's premium stabilization programs, due to a change in a federal spending bill.
Regulators ordered the company's shuttering after concluding that Health Republic was about to become insolvent. Now, as the company's shutdown is heading toward its December 31 culmination, other insurers within the state are scrambling to claim a share of the affected customer base.
The policies sold by Health Republic were the standardized ones sold on the state's ACA Marketplace, which means consumers were not sacrificing coverage in return for the low premiums.
For example, consumers could save about 26 percent by purchasing a Health Republic silver-premium plan, as compared to the state's average cost for silver plans. ACA plans are characterized by the amount of essential heath benefit costs they cover: 60% (bronze), 70% (silver), 80% (gold), and 90% (platinum).
About half of the 215K terminating policies are owned by individuals, with the balance owned by small businesses. The shutdown was timed to precede the marketplace's open enrollment period, which begins in November.
Health Republic was established as a cooperative, meaning it did not benefit from a private investment – startup costs were funded by the government.
This is the fourth shutdown nationwide among the original 23 ACA co-ops. The remaining 16 insurers offering individual exchange plans in New York State are competing to sign up the former Health Republic members.
The insurer had covered 35 percent of small businesses and 19 percent of individuals enrolled in 2015 by the state's marketplace.
The shutdown is a particularly acute problem for members who are in the middle of treatment or who now must find a new physician because each ACA plan defines the network of doctors and caregivers it covers to the policy's maximum amount.
Moving to another policy can mean that consumers will have to deal with a different network, and hence a different doctor, if they want maximal reimbursement for covered medical charges.
Health Republic members are now faced with the unenviable task of evaluating new insurers and selecting one before the end of 2015.