CO-OP’s growing pains could trigger liquidation

The winter holidays weren’t so merry for CoOportunity Health, whose health plans were pulled in both the individual-market and SHOP exchanges in Iowa and Nebraska for 2015 as regulators review the startup’s financials.

But what’s “remarkable” about the carrier’s evolution is that it captured nearly a quarter of the total enrollment for all 23 consumer-operated and oriented plans known as CO-OPs operating in 24 states on a shoe-string budget, according to Tom Alger, a spokesman for the Iowa Insurance Division. He estimates the CO-OP’s initial funding at about $112 million, with another $40,000 or so layered on top since 2013.

“If you look at that number of total capitalization through funding received in anticipation of this, it’s a fractional amount compared to some states that had 10% of their enrollment and maybe four times their funding,” Alger explains, referencing the carrier’s growing pains.

Iowa Insurance Commissioner Nick Gerhart, who seized control of CoOportunity Health, is now tracking all of its financials, including accounts receivable, claims payments and premium receipts involving about 108,000 enrollees in Iowa and Nebraska where the CO-OP operated.

“The issue is not insolvency, but illiquidity because they don’t have sufficient money to continue,” Alger says.

As part of this “rehabilitation” phase, Gerhart is considering whether there could be an infusion of other funding – a scenario that he has hinted does not appear to be forthcoming. Based on this action, the neighboring Nebraska Department of Insurance suspended CoOportunity Health’s certificate of authority.

If the CO-OP is liquidated, then Alger says “a guarantee fund would take care of claims incurred up to $500,000 per person, funded by an assessment against other health insurance companies in the state of Iowa.” Another issue that influenced Gerhart’s decisions concerning CoOportunity Health was a delay of federal payments for risk mitigation programs until the second half of 2015.

Dana Woods McNeill, an executive VP with CoOportunity Health, says the CO-OP is cooperating with state and federal regulators, as well as rehabilitators, “to determine next steps for policyholders in Iowa and Nebraska.”

CoOportunity Health’s troubles mean there are fewer choices for Iowans, which will also affect the employer-provided health benefits landscape. “Certainly some employers, depending on their situation, were looking at people being on individual plans,” Alger observes.

He says there’s at least one statewide and one regional carrier with exchange plans, as well as “an opportunity to be off-market if they’re not looking for the credits that are applicable for an employer through the exchange.”

In a recent notice to insurance brokers and agents, the Iowa Insurance Division noted that their CoOportunity Health commissions have been suspended and urged producers “to move all CoOportunity Health business, new and renewal, to other carriers as soon as possible.” The same warning was issued in Nebraska.

Previous to this development, CoOportunity Health decided to pull out of Iowa’s Marketplace Choice Plan – an integral part of the Hawkeye State’s unique stamp on Medicaid expansion. To continue would have been a money losing proposition to cover 9,700 Iowans, who have since been switched to public coverage under the Iowa Health and Wellness Plan.

The Des Moines Register reported that CO-OP customers who mainly bought individual-market policies “could face up to several thousand dollars in extra costs because of the timing of the carrier’s crisis.” Other concerns include having to switch doctors or pay higher deductibles on another health plan.

Martin Hickey, chairman of the National Alliance of State Health CO-OPs, was careful to note in a prepared statement that CoOportunity Health’s challenges aren’t necessarily a reflection on other CO-OPs.

“In only a year’s time,” he said, “hundreds of thousands of Americans have chosen CO-OP health insurance plans to meet their health care needs. Beyond enrollment success, CO-OPs’ impact can be felt via the lower average health insurance premiums in states with a CO-OP and through innovative CO-OP plan design that has created meaningful choice and competition within the health insurance marketplaces.”

Bruce Shutan is a Los Angeles-based freelance writer.