Lake Oswego-based Health Republic Insurance Co. announced Friday it is shuttering operations and withdrawing from Oregon’s health insurance marketplace in 2016, citing lower-than-expected payment from a federal program designed to shield carriers from financial risk.

All current individual and group insurance policies will be canceled effective Dec. 31.

The carrier also will not participate in 2016 open enrollment, which begins Nov. 1.

Health Republic had 844 enrollees in Crook, Deschutes and Jefferson counties as of June 30. Statewide, the carrier had roughly 10,200 enrollees as of that date, according to the Oregon Insurance Division.

While those are significant numbers, Health Republic is far from the most popular insurance carrier in Oregon. Moda Health, which captured the largest proportion of the market, had nearly 375,000 enrollees as of June 30, including roughly 29,000 in Central Oregon.

Dawn Bonder, Health Republic’s CEO, said the company learned Oct. 1 that it would be receiving more than $7 million less than anticipated through the federal risk corridors program, which provides payments to insurance companies whose claim payments exceed their costs with the goal of protecting them against uncertainty in the first three years of selling on the health insurance marketplace.

This year, companies nationally received an average of only 12.6 percent of what they expected to through the program.

On top of that, Bonder said her company learned this week there is uncertainty about its 2015 risk corridors payment as well on the order of $15 million.

“That combined with the 2014 shortfall is a more than $20 million capital hole,” she said. “We did not believe it would be responsible or ethical of us to move forward in 2016 without a clear understanding of when and if this money would be received. We have not received any indication that we can rely on that money to come in a timely manner for us and therefore have decided to not put our members and Oregonians at risk and to withdraw from the ’16 market.”

Many carriers were depending on the risk program to offset the collective $127 million in losses they experienced in 2014, the result of underestimating the cost of claims they would be required to pay that year. This year’s losses are expected to be similar.

For its part, Health Republic paid more than double in claims than it took in from premiums. As a result, the carrier was set to increase the cost of its individual policies by an average of nearly 38 percent. Enrollees would have seen hikes between 33.2 percent and 46.9 percent.

Health Republic is one of two Consumer Operated and Oriented Plans in Oregon. The other is Oregon’s Health CO-OP. The Affordable Care Act created 23 such carriers in an effort to provide affordable coverage and create more competition in marketplaces, but already nine have since folded or announced plans to do so, including Health Republic.

Health Republic received roughly $60 million in startup and solvency loans from the federal government.

Despite the co-ops’ struggles nationwide, Bonder said she still thinks their creation was a great idea. She thinks they’re simply facing the same struggles all carriers are with the risk corridors program.

“We’re all just collateral damage to a broken political system,” she said. “If we had the capacity to go to Congress, lay it all out and say, ‘Hey, here’s what’s working and what’s not working. Here’s what needs to be tweaked.’ … We just don’t have a functioning legislative body that can take these issues and come out with outcomes that really are for the greater good.”

The Oregon Insurance Division recommends those enrolled in Health Republic policies take immediate action to select a new plan when open enrollment begins Nov. 1. Businesses with small or large group coverage through the carrier should call their agents or company now for help choosing a new carrier.

“We will review Health Republic’s wind-down plan and work closely with Health Republic to ensure that individuals and businesses currently enrolled with Health Republic are protected,” Oregon Insurance Commissioner Laura Cali wrote in a statement.

Also contributing to Health Republic’s decision is the Oregon Insurance Division’s decision not to expand the state’s small group market definition to include businesses with up to 100 employees. Bonder said that move probably will dissuade some employers from purchasing on the small group market, which makes up more than 75 percent of the company’s membership.

Bonder said there is no possibility that Health Republic will re-enter the market in the future.

“I just want people to know that we are extremely frustrated, extremely disappointed,” she said, “but we believe we made a choice that will be in the best interest of our members and Oregonians.”

— Reporter: 541-383-0304,

tbannow@bendbulletin.com