NCPA - National Center for Policy Analysis


June 9, 2010

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." 

Last week, in a letter to the company's 50 or so employees, Executive Vice President James Slabaugh said nHealth has stopped accepting new group customers and will terminate all business by Dec. 31. 

  • NHealth opened for business about 2½ years ago and was named in October 2008 one of the "Greater Richmond Companies to Watch" by a local business group.
  • Kitchen estimates the company has about 100 small-business contracts providing policies to "thousands" of subscribers.  

NHealth specializes in high-deductible insurance plans, meant to cover larger medical emergencies, that are paired with health savings accounts, the tax-deductible accounts used to pay for medical expenses: 

  • HSAs have grown dramatically since they were authorized in the 2003 Medicare Prescription Drug Improvement and Modernization Act.
  • There were about 1 million enrollees in 2005. Now there are about 10 million, according to a May 2010 report from the industry group America's Health Insurance Plans.
  • HSAs are a favorite of conservative health economists, who see the plans as a way to control costs by leaving spending decisions to individual consumers. 

In an interview with POLITICO, Kitchen said the impact of health reform on his business is twofold: 

  • It created an uncertain future; with regulations yet to be written and rules constantly forthcoming, he said, "everything felt beyond our control."
  • Kitchen is apprehensive about a more regulated insurance market; the 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.  

"The rules changed in the middle of the game," Kitchen said. "We're not willing to wander into that environment." 

Source: Sarah Kliff, "First victim of health care overhaul?"  Politico, June 7, 2010. 

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