Editor's Note: On Friday, Oct. 16, regulators in Colorado and Oregon announced their states' CO-OPs would cease to exist in 2016. More to come.
Within the next two weeks, two to three CO-OPs will likely announce their intention to shut down by the close of 2015, industry officials say. This follows news of Community Health Alliance, a Tennessee-based CO-OP, announcing this week that it will no longer offer insurance coverage in 2016.
There are likely to be up to three more CO-OP closures before Nov. 1, says Peter Beilenson, founder and CEO of Evergreen Health, a Baltimore-based CO-OP. The closures are stacking up now because those CO-OPs that are closing will not be allowed to place product on the Affordable Care Act’s exchanges, which open Nov. 1, Beilenson says.
After all recent closures and the new ones expected, that will leave 14-15 “quite solid” CO-OPs, he adds.
The Centers for Medicare and Medicaid Services also says more CO-OPs may have solvency issues this year. “If a CO-OP has solvency issues — and we cannot rule out that others may this year — we will work with the states so that consumers have affordable options on the marketplace,” says CMS spokesperson Aaron Albright.
“In the years since the passage of the ACA, we‘ve seen increased competition and more choices for consumers,” Albright adds. “CO-OPs played an important role in that process, particularly in early years of the ACA. However, as a startup business, we recognize not all will succeed.”
A sea of closings
The closure of Tennessee’s Community Health Alliance follows the closure of Health Republic Insurance of New York, the nation’s biggest nonprofit health insurer, which was closed in a series of moves by state and federal regulators. That late September shut down follows closures by CO-OPs in Nevada, Louisiana, Iowa, Nebraska and Kentucky in recent months.
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The Tennessee closure is due to the company’s financial condition and was made in collaboration with the Centers for Medicare and Medicaid Services, and the Tennessee Department of Commerce and Insurance (TDCI), a TDCI spokesperson says.
The Tennessee CO-OP has 27,000 enrollees and will wind down its existing business and pay all related policy claims, while ceasing to take on new customers. As with Health Republic Insurance of New York, Community Health Alliance customers will keep their coverage through Dec. 31, and then must re-enroll in a new health care plan during open enrollment.
The closure of Community Health Alliance “was not a decision that the department took lightly, but it was the right decision,” TDCI Commissioner Julie Mix McPeak says. “With thousands of Tennesseans’ coverage hanging in the balance, CHA’s financial success could not be guaranteed. Ultimately, the risk of CHA's potential failure in 2016 was too great and would have caused substantial detrimental effects on the market as a whole if it were to collapse.”
However, this shutdown was unexpected. Nelson Griswold, president at Nashville, Tenn.-based Bottom Line Solutions, says he was at a National Association of Health Underwriters lunch meeting on Tuesday in Jackson, Tenn., that was sponsored by Community Health Alliance. The company’s representative told the NAHU members present that his company was in it for the long haul and had a lineup of new plans with great pricing, Griswold recalls. The salesperson added his company was looking forward to a successful ACA open enrollment.
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“The sales people are always the last to know,” Griswold, an EBA columnist, says. “The … failure reduces choice on the public exchange for Tennessee consumers and creates inconvenience and disruption for the 27,000 who own a CHA plan. The CHA failure points to the difficulty of pricing a health plan that will be offered to a population of consumers.”
Community Health Alliance did not immediately return a call for comment.
Solvency
Beilenson says his CO-OP, which operates in Maryland, is not having solvency problems and has 700% risk-based capital, a measure of solvency. CMS requires CO-OPs maintain 500% risk-based capital.
But, his company is facing perception issues, Beilenson says. “We are putting out blasts to brokers that say we have plenty of solvency,” he says. “We don’t have a cash problem. We are selling rapidly and are priced appropriately. … We are doing great and have to let people know that.”
In the last few days, following the news of CO-OPs shutting down in Tennessee and Kentucky, Beilenson says there have been a couple calls from brokers with questions or concerns.
Part of the reason for his company’s success, he says, is that it diversified. When Maryland’s public exchange had well documented issues during recent open enrollments, Evergreen expanded to the small group market.
