Execs: Health-care co-ops defy forecast

Sunday, March 16, 2014

WASHINGTON - In Maine, the insurer that has enrolled the most Affordable Care Act customers isn’t the state’s well-established Blue Cross and Blue Shield plan, owned by WellPoint Inc. It’s WellPoint’s only rival: Maine Community Health Options, a startup that didn’t exist three years ago.

The newcomer, funded primarily by taxpayer money lent under the U.S. health-care law, has obtained about 80 percent of the market so far in Maine’s new insurance exchange, exceeding its own expectations, said Kevin Lewis, the chief executive officer.

Health-law opponents predicted early on that insurance co-ops created by the law would fail and that much of the $2.1 billion they were loaned to get started would be lost. Instead, the 23 co-ops that now exist nationally have enrolled about 300,000 people in health plans by combining low premiums with a certain homespun appeal, company executives said.

“We’re doing really well,” Lewis said. Taxpayers face “no risk whatsoever” that Maine Community will go under, he said. “A lot of those early, dire concerns just need to be re-examined.”

The 2010 Patient Protection and Affordable Care Act refers to these new companies as “Consumer Operated and Oriented Plans,” or co-ops. Not all of the new companies have thrived. Some, such as Maryland’s, have struggled to sign people up because of problems with their state’s exchange,while others, including Michigan, purportedly have set their premiums too high.

The successful co-ops “emerged as price leaders,” responsible for more than a third of the lowest-premium plans offered on U.S. exchanges, according to an October report by consulting firm McKinsey & Company.

Executives from these nonprofit groups in part credit innovative benefit designs for their success, including features that offer free doctors’ visits and generic drugs, and even $100 gift cards for people who get an annual physical.

In Windsor Heights, Iowa, Geoffrey Wood, 35, the chief operating officer of Startup Genome, said he signed on for the state’s co-op, CoOportunityHealth, because he had grown tired of dealing with his previous insurer, Aetna Inc.’s subsidiary Coventry Health Care Inc.

“Given the choice between them, as the incumbent company, and an innovative company trying to do something different, I didn’t feel like I had much choice,” Wood said. “I decided to give the new guy a shot.”

Cynthia Michener, a spokesman for Hartford, Conn.-based Aetna, said Coventry’s advantages for enrollees include experience with the Iowa health-care system and stability. She declined to discuss Wood’s case without authorization from him.

“Coventry Health Care has served Iowans for more than two decades, and knows the community and its health-care needs well,” Michener said in an email.

About 4 million Americans have signed up for private health plans using new marketplaces created by the law, the U.S. government says. The Congressional Budget Office projects 6 million will enroll this year, a reduction of 1 million from estimates before the troubled introduction of the law began in October.

Co-ops in Maryland, Oregon and Massachusetts haven’t hit their target enrollments because their state-run exchanges still aren’t functioning well. And Vermont’s co-op dissolved in September, returning its federal solvency loans, after state regulators denied it an insurance license, saying the company’s enrollment expectations were unrealistic and its proposed rates weren’t competitive.

At the same time, co-ops in Michigan and Tennessee haven’t grown at the rate of peers because they initially overpriced their plans relative to competitors’, spokesmen for the companies said.

“2014 is preparation, really, for ’15,” said David Eich, a spokesman for Consumers Mutual, the Michigan co-op. “We’re going to be really engaged back on the individual market.” He said the company isn’t in danger of going out of business.

Some Republicans, meanwhile, still contend taxpayers remain at risk of losing much of the money lent to the companies. At a Feb. 5 hearing about the co-ops, Rep. James Lankford of Oklahoma called the program “an investment disaster,” and said there remains “the possibility that American taxpayers will be left on the hook.”

For a handful of co-ops, success has raised a new concern. If they enroll many more customers than they expected, they could run afoul of state regulators who require companies to maintain cash reserves sufficient to cover medical claims in the event they go out of business. All the co-ops received multimillion-dollar loans from the government to fund solvency reserves, and the size of each loan was based on projected enrollment.

The Iowa co-op, CoOportunity, which also serves Nebraska, has signed up about 54,000 members, after projecting it would enroll just 11,800 by the end of March, said Cliff Gold, the chief operations officer.

The co-ops have lobbied the Centers for Medicare and Medicaid Services, which controls the loans, to make more money available for reserves. Congress capped spending on the co-ops as part of a budget deal in January 2013, leaving $253 million in a “contingency fund for oversight and assistance” to the firms, according to another budget document published March 4.

Front Section, Pages 4 on 03/16/2014