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On Tuesday, the state of Illinois moved to take over control of Land of Lincoln Health to begin the shutdown of the company, which means 49,000 people holding health insurance with the company will lose coverage over the upcoming months.
The state announced it would allow company policyholders to purchase coverage from another insurer prior to their plans being terminated at Land of Lincoln, but it was not clear when the company’s policies would actually lapse.
The interim CEO and President of Land of Lincoln, based in Chicago said on Tuesday it was a bad day for the Illinois marketplace and the consumer as this is the end.
The state’s Department of Insurance announced its decision had been based on the company’s deteriorating financial position.
Land of Lincoln must pay over $31.7 million to other insurers to comply with a complex formula for the federal government’s Affordable Care Act that has the goal of keeping premiums stable through balancing risks amongst insurers.
However, the payment put too great of a financial strain on Land of Lincoln following a $90 million loss last year.
The agency’s director attempted to have the payment of Land of Lincoln suspended until the company received federal financial assistance that had been promised under the new law for healthcare, known by most as Obamacare.
However, the federal government’s Center for Medicaid and Medicare Services failed to agree with the plan of suspending the payment.
Nationally, the insurer had been one of 23 non-profit health insurers, which are co-ops that begin during 2014 under $2.4 billion worth of loans the healthcare law provided.
The co-op program’s goal was to give the consumer alternatives to the large insurance companies like Blue Cross and Blue Shield that could possibly lower the cost of the health plans. Over 1 million people in the U.S. were insured through those types of plans.
However, many of the co-ops struggled. Some grew very fast and could not keep up with costs of healthcare for members, many who had not purchased insurance for years.
Then they were hit blindside in 2015 when the U.S. government money they were counting on as a way to offset losses did not come to fruition.
Land of Lincoln attempted to survive through curtailing its sales of any new policies. The co-op also filed suit against the government in an attempt to recoup over $70 million under a federal program.
