COOP Health Insurance…Alert!

Section 1322 of the Affordable Care Act (ACA) allowed for the establishment of “consumer operated and oriented plans” or COOPs.  Bolstering the ACA’s goal of expanded health insurance coverage, and borrowing from the agricultural industry’s adoption of COOPs in the 1920’s, twenty-four COOPs were approved and funded by the federal government.  Specifically, the fed awarded nearly $2 billion to the 24 approved COOPs operating in 24 different states.  In theory, the COOPs would bring more competition and choice into the market, which is a welcome change from the hundreds of insurers who have abandoned the health insurance market over the last several years (see Metropolitan Life, Travelers, NY Life, Prudential, Principal, American Chambers Life, and Mutual of Omaha to name just a few).  And if not for funding cuts, and a significant reduction of the originally proposed $6 billion funding allocation, there would likely be even more COOPs in existence.

Here’s where the existing/approved 24 COOPs reside…

And here’s a partial list of some of COOPs “open for business”:
  1. Evergreen Health Cooperative (Maryland)
  2. HealthyCT (Connecticut)
  3. Compass Cooperative Health Network (Arizona)
  4. Minutemen Health (Massachusetts)
  5. Freelancers CO-OP of New Jersey (New Jersey)
  6. CoOportunity Health (Iowa and Nebraska)
As for the aforementioned no. 6, and what could potentially be a frightening bell weather for the other 23 existing COOPs, the Iowa Department of Insurance formally placed CoOportunity Health under “rehabilitation” on Christmas Eve, effectively shutting down the COOP operating in the states of IA and NE!  After receiving inital funding of $146 million*, and enrolling nearly 120,000 new members* in less than two years, CoOportunity Health became a victim of its own success; and funding cuts resulting from the Budget Reconciliation Bill, aka Cromnibus.  Iowa’s insurance commissioner – Nick Gerhart – was quick to clarify that “CoOportunity [Health] is not insolvent and claims will continue to be paid”.  However, Gerhart added that people who signed up for the first time with CoOportunity Health after December 15, 2014 “will not have coverage and should find other insurers”, signaling the potentially premature end to their [government funded] run.
The idea behind the organizational structure of the COOPs, and making them quite unique in the otherwise profit driven insurance industry, was that they would be governed and run by their members, and organized under state law as a non-profit corporation.  Any surplus realized by the COOPs is required to be used to: 1. reduce premiums; 2. improve benefits; and/or 3. improve quality of member care.
Ironically, while CoOportunity Health was able to organize and open its doors for business relying on government funding…an unanticipated reduction in additional, anticipated government funds (totaling $125.6 million*) has quite possibly resulted in their ultimate demise.  And any potential new entrants to the health insurance business (if there are any), and the remaining COOPs should take note that this company lasted less than two years, starting out with zero risk, $130.6 million in solvency funds and $15.4 million in operating capital*.  Furthermore, they experienced phenomenal growth of 120,000 new members*…in less than 2 years!
* Source: Omaha World Herald; Money & Jobs; “Insurer’s Takeover Complicates Sign-Up Period; Steve Jordon; December 28, 2014
I’ll conclude with some words of caution for various stakeholders:
  • HEALTH CARE PROVIDERS IN NE AND IA: patients seeking care that are insured by CoOportunity Health will continue to have coverage and presumably the ability to have eligible claims paid in the short term with existing capital on hand, and in the longer term by guarantee funds through a reinsurance system present in all states.
  • HEALTH CARE PROVIDERS IN OTHER STATES: be aware of the existence of COOP health insurance plans in your state, and keep tabs on their financial viability knowing that some patients may be insured through a COOP that may or may not be relying on additional government funding to remain viable.
  • INSURED MEMBERS IN NE AND IA: take quick action to change insurers; contact your insurance agent/broker and request to change insurers; if coverage was recently purchased on the public exchange, there’s still time to switch plans/insurers during open enrollment; the enrollment deadline is 1/15/15 for a 2/1/15 effective date of coverage.
  • INSURED MEMBERS IN OTHER STATES: if considering health insurance through a COOP, do your research on the financial viability of the company and the number of new customers enrolled since inception.  Ask a lot of questions about the leadership and direction of the COOP.