Many Co-Ops Created Under ACA Struggling Financially, Reports Find

Many not-for-profit Consumer Operated and Oriented Plans are in similar or worse financial shape than an Iowa co-op that the Iowa Insurance Division last month said must be liquidated, according to several new reports, Modern Healthcare reports.

Background

CoOportunity Health, a consumer-governed plan, was one of 23 Co-Ops established under the Affordable Care Act's Co-Op Program to create competition on exchanges.

In December 2014, Iowa assumed control of CoOportunity Health, which sold plans in Iowa and Nebraska. Last month, the Iowa Insurance Division shut down CoOportunity Health because premium revenue was not sufficient to cover enrollees' medical costs and the Co-Op faced significant losses.

Report Findings

For one report, Standard & Poor's analyzed the financial statements of the 23 co-ops created under the ACA for the first nine months of 2014.

The report found that co-ops' net losses during the first three quarters of 2014 ranged from $2.9 million to $39.8 million.

Researchers also found that:

• While CoOportunity had the largest net loss over the time period, its ratio of its deficit to its remaining funds was 53%, near the median amount for the 23 co-ops;
• Eleven co-ops had worse net loss-to-surplus ratios than CoOportunity;
• Community Health Alliance, a co-op in Tennessee that last month froze all exchange enrollments but anticipates participating again in the exchanges during the next open enrollment period, had the highest net loss-to-surplus ratio, at 314%; and
• The medical-loss ratios for some co-ops were "hopelessly high," which indicated that many sicker patients enrolled in co-op plans.

Report author Deep Banerjee said, "Some of these numbers don't look very good for these companies." However, he added that some of the co-ops had made strides in their cost management since Sept. 30, 2014, and that some had received additional funds from CMS. He noted that the report should not result in immediate speculation as to whether other co-ops would go out of business.

Meanwhile, a separate report by the Robert Wood Johnson Foundation and the University of Pennsylvania's Leonard Davis Institute of Health Economics also found that the 23 co-ops tended to have high claim costs, with several co-ops having higher administrative and medical expenses than CoOportunity.

Congressional Inquiry Into CoOportunity

In related news, three Republican senators in a letter on Monday requested information from CMS Administrator Marilyn Tavenner on the agency's plans to assist CoOportunity enrollees, some of whom had already been subject to out-of-pocket costs that counted toward their deductibles.

Sens. Joni Ernst (Iowa), Deb Fischer (Neb.) and Chuck Grassley (Iowa) wrote, "Had CMS made funding decisions for the co-ops prior to the start of open enrollment, CoOportunity would not have been on the marketplace, and these individuals would not be facing their current predicament" (Herman, Modern Healthcare, 2/10).