On my Twitter account last week, I noted the story of a Richmond, VA health insurance start-up that specializes in consumer-driven health care plans—or did, anyway, until it shut down. The top execs are now claiming the company was put out of business by regulatory uncertainty created by the passage of ObamaCare. Today, Politico's Sarah Kliff has a nice follow-up:
A Virginia-based insurance company says "considerable uncertainties" created by the Democrats' health care overhaul will force it to close its doors by the end of the year.
The firm, nHealth, appears to be the first to claim that the new law has driven it out of business. "We don't know what the rules are going to be and, as a start-up, our investors need certainty," nHealth CEO and president, Paul Kitchen, told POLITICO. "The law created so much uncertainty that is beyond our control."
…In an interview with POLITICO, Kitchen explained the impact of health reform on his business as two-fold. First, it created an uncertain future. With regulations yet to be written and rules constantly forthcoming, he said "everything felt beyond our control."
Second, Kitchen is apprehensive about a more-heavily regulated insurance market. The new health reform law requires insurance companies to spend a certain amount of premium dollars on medical costs and, in many cases, bans lifetime limits on medical coverage. Kitchen said he was uncertain whether nHealth would be able to comply.
"The rules changed in the middle of the game," says Kitchen. "We're not willing to wander into that environment." The White House aide agreed that the rules will indeed change, but in a way that benefits consumers. Stricter regulations will ultimately guarantee better coverage for subscribers. The medical loss ratio regulation, for example, will ensure that insurers spend a certain percent of subscriber dollars on medical costs rather than administrative expenses.
The fact that there are losers in a market is not by itself proof that a law is problematic (I can imagine any number of deregulatory moves, especially in the energy sector, that might kill some business models). And start-ups with short track records are inherently less stable than existing successful businesses, which means they're the most likely to get pushed out when rules change. But it does suggest the tough road health insurers are going to have ahead of them, and, in particular, the difficulties that companies that aim to innovate with CDHC-flavored plans are likely to face.
I took a longer look at how ObamaCare threatens consumer-driven health care plans here.