More analyses of the Affordable Care Act’s not-for-profit health insurers indicate that high medical claims and net losses are not the exception but the rule in their first months of operation.
The co-op plans, heavily criticized by Republicans, will need to be monitored closely over the next several months to see if any others face the same fate as the failed CoOportunity Health, two new reports said.
Last month the Iowa Insurance Division ordered the closure of CoOportunity, one of 23 not-for-profit co-op insurance companies funded by the Affordable Care Act. The healthcare law created the co-ops as an alternative to the politically charged public option and to foster competition in the individual marketplaces.
Iowa commandeered CoOportunity, which enrolled about 100,000 individual and group members in Iowa and Nebraska, in late December because steep losses were overwhelming the plan. Premium revenue was insufficient to cover enrollees’ high use of medical services and the CMS denied any extra funding. A potential lifeline for co-ops was endangered in late 2014 when Congress required the risk-corridor program to become revenue-neutral as part of an omnibus spending bill.
New reports show that several co-ops were in similar or worse financial situations late last year. Co-ops in many states gained membership by offering low premiums, but that strategy, along with their relatively small sizes, made them more vulnerable to catastrophic medical claims.
Standard & Poor’s looked at the financial statements of the 23 co-ops from the first nine months of 2014 (ratings agency A.M. Best Co. conducted a similar review in January). S&P found that nine-month net losses ranged from $2.9 million to $39.8 million. CoOportunity had the largest loss, but its deficit as a percentage of its remaining funds was only 53%. That figure was near the median—an ominous sign for other co-ops that struggled during Obamacare’s first open-enrollment period.
“Some of these numbers don’t look very good for these companies,” said Deep Banerjee, an analyst at S&P and author of the co-op report.
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