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Insurer start-ups struggle to establish cash flow

Jan. 11, 2014 at 12:32 PM

NEW YORK, Jan. 11 (UPI) -- Signing up for health insurance and paying for it is a potential gap that has posed complications under Obamacare, U.S. insurers say.

Jan. 10 was the deadline set by the industry for insurers to receive payment from consumers with plans that began Jan. 1, the Wall Street Journal reported Saturday.

But the gap between signing up and actually paying for a plan -- late initial payments in other words -- has forced many firms to push back the pay deadline to accommodate roughly 2 million people the government said had signed up and had not paid, the Journal reported.

"It's been pulling teeth," said Shaun Greene, chief operating officer of Arches Health Plan, a start up insurer in Utah.

Arches said it would grant customers some leeway on late payments, as it had received only 60 percent of the initial payments it had expected.

Allowing, perhaps, a broader view of the problem, Benaissance, a billing company for insurers that sell plans through government exchanges in 17 states, said payments had been received for 67 percent of new enrollees as of Friday.

Pushing back deadlines has not been unprecedented. The government extended its enrollment deadline after its website HealthCare.gov's bungled launch.

Start-ups, however, face a problem that established insurers have overcome, which is creating a predictable cash flow that allows for profit even though some customers drop out for lack of payment or tend to pay late.

Starting a business, especially a small one, "does create some cash-flow challenge," said Kathy Oestreich, chief executive officer of Meritus, a plan in Arizona.

Meritus had received 80 percent of its initial payments by Friday and would skate by as the first trickle of payments would be under light stress from a smaller number of liability claims, the Oestreich said.

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