Health care consumer oriented and operated plans in the USA have had a challenging year – and now, only four of the original 23 CO-OPs set up under the 2010 Affordable Care Act (ACA) survive.
The National Alliance of State Health CO-OPs (NASHCO), a trade body representing them, also closed down earlier this year.
The four health care co-ops expected to be operating on the Obamacare insurance marketplace in 2018 are based in Maine, Wisconsin, Montana and New Mexico.
After two difficult years in which it reported losses totalling nearly $90m, Maine-based Community Health Options ended the first quarter of 2017 with a USD $3.7m surplus. Montana’s Health CO-OP has also resumed accepting new enrolees after it voluntarily pulled itself from the state’s insurance marketplace in December last year in order to boost its financial reserves. It expects to have $28m in profits this year.
Similarly, Common Ground Healthcare Co-op from Wesconsin saw net profit of $2.7m in the first quarter of 2017. New Mexico Health Connections also reported profit last year and plans to sell individual policies in New Mexico through the state exchange in 2018.
Also known as Obamacare, the ACA provided $2.4bn in federal loan money to help start-up organisations seeking to establish CO-OPs. These are consumer-owned, though not all of them work as co-operatives. All CO-OPs have a board made up and elected by their members and they also need to work on a non-profit basis. Therefore, all profit is returned to members either in the form of refunds, premium reductions or expanded benefits.
CO-OPs were set up to increase competition in the healthcare sector. A Government Accountability Office report found that across the 23 states in which they were set up, the average silver health plan premiums were lower for CO-OPs than other issuers in 31% to 100% of rating areas.
The report also highlighted that the combined enrolment for the 22 CO-OPs that offered health plans in 2015 was over 1 million as of June 30, 2015, more than double the enrolment of a year earlier.
However, a key problem for these CO-OPs was that customers on the exchanges tend to buy insurance when they are sick and give it up once they get better. Due to the fact that sick customers tend to remain, the cost supported by the CO-OPs was higher than expected.
Another barrier was the risk adjustment programme adopted in January 2014, which intended to transfer revenues from insurers that cover low-risk enrolees to those that cover high-risk enrolees to provide a disincentive for risk selection.
At the time of the adoption, NASHCO warned that the formula favoured bigger players with more claims experience. It said that small insurers such as CO-OPs do no have as much claims data, which meant that their membership could look healthier than in reality. CO-OPs owed nearly $150m under the programme.