The number of insurers carrying out one of the Affordable Care Act’s most idealistic goals continues to plummet, with just seven nonprofit member-run health plans set to take part in the law’s fourth enrollment season this fall.
That’s down from 23 such plans — co-ops, as they are commonly known — that started in 2014. Eleven are still in business, but four in Oregon, Ohio, Connecticut and Illinois will fold soon because of financial insolvency. Just Tuesday, the Land of Lincoln Mutual Health Insurance Co. was ordered to close by Illinois regulators.
For the rest — which all posted annual losses in 2015, according to the National Alliance of State Health Co-ops — survival is Job No. 1. Some co-ops are diversifying to serve larger employers, no longer limiting themselves to their ACA mandate to offer health plans to individuals and small businesses. Others are trying to renegotiate contracts with hospitals and other providers.
And a Maryland co-op has sued the federal government in an effort to avoid paying millions of dollars to other insurers under a complex formula in the law, which aims to keep premiums stable by balancing risks among insurers and helping ones with patients who need a lot of care.
A year ago, when more than 20 co-ops were up and running, about 1 million Americans were insured through these plans. By contrast, the Alliance says the seven co-ops that will remain in 2017 have about 350,000 members. Their supporters continue to tout them for cost-effective coverage, pointing to sources such as a recent General Accountability Report that found co-ops’ average monthly premiums in 2015 were below the averages for other plans in most areas.
“They are not essential for the success of the Affordable Care Act, but they do offer an important alternative to commercial insurers,” said Timothy Jost, a law professor at Washington and Lee University in Virginia and an expert on the health law.
With seeding from federal loans, the ACA’s “consumer operated and oriented plans” were conceived as an alternative to commercial insurance. Advocates envisioned them spurring competition by giving Americans a way to buy health insurance from companies with a strong consumer focus.
But many struggled early — and their problems became part of the highly politicized debate over the law on Capitol Hill. Some co-ops increased enrollments too fast and then could not keep up with rising health costs, while others could not gain enough members.
Shortfalls in anticipated levels of federal funding contributed, too. At the end of 2014, for example, insurers got blindsided when money they had counted on to offset losses was cut sharply from the ACA’s risk corridor program. That program transfers funds from participating insurers with high profits to those with high losses. The move disproportionately hurt small insurers, according to the nonpartisan Commonwealth Fund.
For the 2017 enrollment season, most co-ops have proposed increasing premiums, often by at least 10 percent. But raising premiums is only part of the solution.
The Maine Community Health Options plan has contracted with a new pharmacy benefit manager, Express Scripts, with the aim of saving about $14 million annually by paying lower drug prices.
The co-op has 80,000 members, representing about 60 percent of the state’s ACA marketplace. But that’s less than 5 percent of the market when large employers are included, a group that the plan will court for new customers.
The 47,000-member New Mexico Health Connections is seeking to raise money from investors, which the Obama administration only recently allowed co-ops to do. Chief executive Martin Hickey said it also is expanding its client base by adding larger employers and labor groups. “The only way to survive is to diversify,” he said.
To the north, Montana Health Co-Op is focused on holding administrative costs in check. The plan, which has about 35,000 members in Idaho and Montana, is down to about 20 full-time employees. “Some people we had during our start-up mode we figured we can now work without them,” said spokeswoman Karen Early.
Montana Health, which lost about $40 million last year, has requested an average premium increase of 21 percent in Idaho and a 22 percent increase in Montana, she said.
In addition to the health law’s risk corridor program, another provision requires insurers to make payments to competitors with sicker and costlier members. That is what Maryland’s Evergreen Health is challenging in court.
The co-op, which has about 40,000 members, is alleging that this risk-adjustment system is flawed because it does not adequately measure risk. The plan’s lawsuit is pending in federal court, with a decision expected this summer. In the meantime, the government last week ordered Evergreen to pay $24 million to the other Maryland insurers that had members with higher health risks in 2015.
Last month, the Health and Human Services Department announced it would build on recent changes intended to “improve the stability, predictability and accuracy” of the risk-adjustment program. But those will phase in through 2018.
Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.