More than 1 million Americans enrolled in consumer operated and oriented plans known as CO-OPs over the past 18 months during which average premium rates in states with these nonprofit alternatives to commercial carrier options were found to be lower than those without such plans.
Health insurance CO-OPs have built on their significant early progress, and the proof is in the large increase in the number of lives they are now covering, according to Dr. Martin Hickey, chair of the National Alliance of State Health CO-OPs board and president and CEO of the New Mexico Health Connections CO-OP. These numbers are further evidence that CO-OPs are making a real impact on the health insurance marketplaces in their states an impact that goes well beyond enrollment numbers. Indeed, health insurance CO-OPs are driving innovation, competition and affordability across the country.
The trade group cited an analysis of the second-lowest cost silver plans showing the average premium rates in CO-OP states fell by 1.9% since 2014, while average premium rates in non-CO-OP states rose by 1.5%. In addition, the average monthly premium difference between CO-OP and non-CO-OP states was found to have increased to 12%.
But the enrollment milestone and competitive rates havent silenced critics, who question their long-term viability or value proposition, particularly on the heels of a high-profile CO-OP failure earlier in the year involving CoOportunity, which operated in Iowa and Nebraska.
GOP lawmakers have seized upon the plans liquidation to buttress their staunch opposition to the Affordable Care Act. Sen. Charles E. Grassley (R-Iowa), for example, initiated a probe of the federal governments role in CoOportunitys collapse, while Rep. Adrian Smith (R-Neb.) described the CO-OPs financial fate as one more example of Obamacares failure.
Even one of the remaining CO-OPs operating in 22 states, Community Health Alliance (CHA) in Tennessee, took post-CoOportunity precautions and put the brakes on accepting new customers on Jan. 15 after meeting its enrollment goals for the current plan year. According to an article published in The New York Times, the Tennessee Department of Commerce and Insurance described the move as a preventative measure to support the long-term viability of CHA and the protection of Tennessee consumers.
The Wall Street Journal editorial board labeled CO-OPs in 2012 as a looming Fannie Med, arguing that many of the plans deliberately underprice their policies and predicting more failures in the coming years.
Anthony Brino, editor of Healthcare Payer News, wrote that CO-OPs were supposed to compete with normal private insurance, but as it happens the amateurs who run them cant attract private financing. Perhaps the lack of accountability to shareholders and capital markets explains why they are starting to fail, though their complete dependence on government subsidies introduced other distortions.
There also has been noteworthy research that adds fuel to the CO-OP firestorm. A recent A.M. Best Company analysis found that Maine Community Health Options was the only CO-OP in the nation not to report financial losses through the third quarter of last year. At issue was the fact that claim payments and other expenses were higher than the premiums collected.
Nick Gerhart, Iowas insurance commissioner, suggested that CoOportunity not only miscalculated how much medical care was needed, but also priced its plans too low to compete with commercial carriers.
Whatever the case may be, Rick Cohen, a national correspondent for Nonprofit Quarterly, recently gave a spirited defense of CO-OPs, writing: The ideological view of nonprofits as being somehow less worthwhile than for-profits seems to permeate the press... It is extraordinary how little attention has come from nonprofit sources about the evidence that the nonprofit health insurance cooperatives have done reasonably well in some states, and in some cases, remarkably well.
He lauded Maines CO-OP for capturing 80% of the market, followed by similar success stories in Kentucky (60% to 77%), Nebraska and Iowa (50%), and Montana (40%), and called on Congress to remove the legislative impediments legislators have strewn in the cooperatives paths so that they can better compete in the HIX market. Another point he made was that CO-OPs lack the profitable options for lines of business that have undergirded the revenues of the big insurers such as Medicare Advantage, Medigap and Medicare part D.
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