Are health co-ops headed for the insurance graveyard?

Less than two years later, nearly all the new health insurance co-ops are posting losses and one is even headed for liquidation.

Insurance News


When the Affordable Care Act was passed in 2010, it called for the establishment of Consumer Oriented and Operated Plans (co-ops)—insurance carriers meant to boost competition and offer competitive health plans for individuals and small groups.

About $2.5 billion in taxpayer dollars went to fund the 23 co-ops, which were responsible for about 300,000 enrollments last year and a third of the lowest-premium plans offered on the state and public exchanges. And despite the co-ops’ large market shares, insurance agents have been skeptical about the groups’ ability to offer low health insurance rates long-term.

“I’ve never been someone who just chases premiums,” said Larry Harrison, a Nevada agency owner who sold just a few state co-op plans last year. “There are so many facets of a health insurance plan. It’s about reciprocity across state lines, it’s about the network and it’s about rate increases that could be suspect going forward.”

It appears Harrison and other like-minded agents may have been right in their hesitancy. According to an analysis from AM Best, just one of the 23 co-ops was profitable last year—Maine Community Health Options.

Meanwhile, co-ops like Massachusetts’ Minuteman Health and New York’s Freelancers Health Services Corporation were less successful. Minuteman Health spent $1,091 in medical and administrative claims per member per month for every $202 it took in in premiums, representing the highest losses in the industry.

One co-op even pulled the plug last week.

Iowa’s insurance commissioner, Nick Gerhart, announced Friday that he would seek liquidation of CoOportunity Health, which covered nearly 120,000 people in Iowa and Nebraska before faltering financially late last year.

Gerhart said CoOportunity Health had less cash on hand than medical claims to cover for members, with no expected infusion of new money until the second half of 2015. He plans to seek a court order this week to liquidate the company, with the order taking effect Feb. 28.

Without CoOportunity Health, Iowa’s insurance shoppers will have just one carrier option: Wellmark Blue Cross & Blue Shield.

The failure of the Iowa taxpayer-funded insurer was a bad blow to those supporting the co-ops’ creation under the ACA.

 “AM Best is concerned about the financial viability of several of these plans,” the analyst firm said in its report.
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