CO-OPs reach yet another tipping point

As pressure mounts on state-run public health insurance exchanges to be financially self-sufficient in time for 2016, consumer operated and oriented plans created under the Affordable Care Act face the same challenge. And with two recent troubling developments in the CO-OP space, there are renewed questions about the long-term viability of these nonprofit entities that seek to compete with commercial carriers that offer plans on the public exchanges.

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Even National Alliance of State Health CO-OPs CEO Kelly Crowe issued a prepared statement acknowledging “no one predicted that every CO-OP would ultimately succeed in the long run” following an announcement that the Louisiana Health Cooperative will cease operations at the end of this year.

She called that notion an “unrealistic” expectation in an industry as challenging as health care, noting that nearly half of all health care start-ups fail early on. LAHC’s difficulties do “not detract from the very real contributions CO-OPs are providing across the country,” according to Crowe. “Indeed, without the presence of a CO-OP, many already concentrated health insurance markets would have very little in the way of choice and competition – a key promise of the Affordable Care Act.”

LAHC will become the nation’s second failed CO-OP after CoOportunity Health, which served Iowa and Nebraska. The latter’s struggles were widely seen as the result of unmanageable growing pains, which also are clouding an uncertain future for Tennessee’s CO-OP, Community Health Alliance. CHA enrolled 35,761 state residents by May 15 compared with just 2,287 members at the end of 2014 when it also reported a $22 million net loss.

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Eyebrows were raised when CHA proposed a huge rate increase for 2016 and halted sales of its plans on Healthcare.gov in January about a month prior to the public exchange enrollment’s end after enrolling many more state residents than expected, which as The Tennessean reported, raised concerns about the CO-OP’s ability to adequately serve its members.

Tennessee insurance commissioner Julie Mix McPeak testified before the House Ways and Means Committee’s oversight subcommittee that she’s unsure whether the 32.6% rate increase CHA has sought would “be sufficient to make the company sustainable and to remove the freeze for the upcoming year.”

However, CHA spokeswoman Ranee Randby counters that the proposed cost hike is still being reviewed ahead of a late August deadline, adding that “CHA’s recent discussions with the Tennessee Department of Commerce and Insurance have left us confident that we will be on the marketplace” for the 2016 HIX enrollment.

Bruce Shutan is a Los Angeles-based freelance writer.