From Inside Health Insurance Exchanges

Will CoOportunity’s Woes Give CO-OPs A Black Eye? Fledgling Plans Think Not

INSIDE HEALTH INSURANCE EXCHANGES provides news and strategic insights on the development and operation of public and private exchanges.

January 2015Volume 5Issue 1

Since the beginning of 2015, CoOportunity Health has been in rehabilitation, under the control of the Iowa Dept. of Insurance and facing possible liquidation. Insurance regulators in Iowa and Nebraska are urging brokers to transfer their clients to other insurance carriers. But Community Operated and Oriented Plan (CO-OP) operators in other states tell HEX that they don’t face the same risk and contend their finances are solid. And insurance regulators in those states say they are closely monitoring CO-OPs, as they would any new carriers.

CoOportunity, one of 24 CO-OPs created by the Affordable Care Act (ACA), has about 120,000 members spread between Iowa and Nebraska. The CO-OP’s membership wound up being more costly than expected. Iowa opted not to expand its Medicaid program as called for by the ACA. Instead, it enacted the Iowa Health and Wellness Plan to extend health coverage to low-income adults, a two-part program that went into effect last January. Part of that program expanded the state’s Medicaid eligibility to 100% of the Federal Poverty Level ($11,490 for an individual). The second part, the Iowa Marketplace Choice Plan, is aimed at adults with annual incomes between 101% and 133% of the FPL ($11,491 to $15,282 for individuals), and allows them to buy subsidized coverage through the state’s federally run exchange. CoOportunity Health and Aetna Inc. subsidiary Coventry Health Care of Iowa were the two providers available in that plan, says Amy Lorentzen McCoy, a spokesperson for the Iowa Dept. of Human Services.

High Risk Sinks Iowa CO-OP

Moreover, Blues plan operator Wellmark, Inc., which dominates Iowa’s insurance market, opted not to participate in the public exchange. “I think they figured out that while they would lose some market share by not participating in the exchange, they would benefit competitively with most of the high risk/high cost Medicaid eligibles going to CoOportunity, which in turn would potentially destabilize CoOportunity’s financial reserves. I can understand that as a business tactic, but not by a not for profit entity that has community based responsibilities,” says Martin Hickey, M.D., CEO of New Mexico-based Health Connections and board chairman of the National Alliance of Health Care CO-OPs.

To offset the higher-than-expected claims, CoOportunity was counting on a $125.6 million infusion from CMS through the Affordable Care Act’s risk-corridors program. But a provision included in the $1.1 trillion spending bill signed by President Obama in mid-December requires that program to be budget neutral (HEX 12/17/14, p. 1). The CO-OP’s reimbursement could be slashed in half as a result. Moreover, payments from the risk-corridors program won’t be distributed until August. When Iowa regulators forced the insurer into rehabilitation, CoOportunity had just $17.2 million in cash and assets, or about $143 per member. The three-year risk-corridors program was designed to shield carriers that wind up with a disproportionate share of high-cost enrollees.

In an alert to insurance brokers and agents, state regulators in Iowa and Nebraska encouraged them to move all CoOportunity business, new and renewal, to other carriers “as soon as possible.” Along with issuing a $500,000 per-member limit on medical and pharmacy claims, state regulators have warned that federal premium subsidies might no longer be available to CoOportunity members.

CO-OP Execs Remain Confident

Last month, HEX reported that CO-OPs, including CoOportunity, had “come out swinging” by offering more competitive rates than they did a year ago (HEX 12/18/14, p. 1). Now that one of them is up against the regulatory ropes, do the others share a black eye?

CO-OP executives don’t think so, and contend that CoOportunity’s problems aren’t representative of the whole group. “CoOportunity is an unfortunate occurrence,” says Peter Beilenson, M.D., CEO of Maryland CO-OP Evergreen Health. “It’s very clear from working with the other CO-OPs that each one is in such a different situation. Our markets are all completely different.”

Ten of the other 23 CO-OPs responded to HEX’s request for comment. Several executives say they aren’t relying on risk-corridor payments. Others say they have countered high-risk individual enrollees by promoting coverage to the off-exchange group markets, which tend to be younger and have lower risk than the individual market. State regulators generally offered little insight about the financial shape of their CO-OPs, but told HEX the carriers appear to be financially sound. Here’s a look at where several CO-OPs stand:

  • Arches Health Plan: Shaun Greene, founder and chief operating officer at the Salt Lake City-based CO-OP, says executives there expected the risk-corridor program to wind up being budget neutral. “We did accrue some money for it that we need to change, but we don’t see it changing our cash position,” he says. “We have taken a conservative position for the 3Rs, and we will try to get the best risk we can.” To do that, Greene says Arches directs its messaging to people under age 30, and has launched a gamification smartphone app aimed at college students. The average age of new members for 2015 is 29 — down from an average of 34 last year. The CO-OP also targets the generally stable large-group market. As of Jan. 1, Arches has about 36,000 members — about two-thirds have individual policies, and about 80% of the rest are large group. Greene says his company could wind up with another 13,000 members by Feb. 15.

  • Colorado HealthOP: A spokesperson for Colorado’s Division of Insurance says HealthOp’s finances meet the minimum capital and surplus requirements of the division and state law. “The situation in Iowa is concerning, but the division is not doing any additional monitoring of the Colorado HealthOP,” says spokesperson Vincent Plymell. “That being said, we do financial monitoring of all our carriers on at least a quarterly basis, which is especially important in the new world of the ACA.”

  • Evergreen Health: Beilenson admits that Evergreen got off to a slow start last year, which he contends was due largely to being undercut by CareFirst, Inc., the state’s Blues plan operator. For 2014, the CO-OP sold just 450 individual policies, but it added 12,000 people through small-group policies. With the majority of membership on the small-group side, and a median age of 35, Beilenson says his firm isn’t expecting much from the risk-corridors program, which is aimed only at individual qualified health plans (QHPs). For 2015, Evergreen’s individual exchange enrollment hit 2,000 six weeks after the open-enrollment period began. Another 500 individuals signed up outside of the exchange. He expects individual enrollment will double by Feb. 15, and small-group enrollment to double by the end of the year.

  • Health Republic Insurance of New York: With “decades of experience” in the health insurance industry, Health Republic’s executive leadership says it has been working consistently with state and federal regulators to “prudently serve its members while maintaining sound financial footing, including adequate solvency reserves,” says Debra Friedman, president and CEO of the New York CO-OP. For the 2014 plan year, the insurer had more than 150,000 members across all product lines.

  • Health Republic Insurance of New Jersey: The CO-OP tells HEX that it is on “a sound financial footing.” The issues affecting CoOportunity were specific to those states, lines of business, and claims experience and have no impact on New Jersey, says Chief Financial Officer Joel Vandevusse. “HRINJ is currently on target to meet its financial projections and already has achieved its enrollment goals for 2015.”

  • HealthyCT: Connecticut’s CO-OP expanded its product portfolio significantly and predicts steady enrollment growth for 2015. “With more choice, competitive pricing and growing brand recognition, we’re earning approximately 20% of the new on-exchange enrollments, versus just 3% last year,” says CEO Ken Lalime, adding that the CO-OP holds a “strong cash position” going into 2015. The insurer also has expanded into the large-group market, which it says has led to significant off-exchange membership. Like any new health insurer, HealthyCT receives heightened scrutiny to make sure it is growing “in a manner which is financially sound and permits them to meet their policyholder obligations,” adds Connecticut Insurance Dept. spokesperson Donna Tommelleo. Lalime says it’s too early to know how HealthyCT will be affected by the budget neutrality of the risk-corridors program. He notes that many smaller carriers, not just CO-OPs, are vulnerable because they don’t have the capacity to absorb adverse risk the way large insurers do.

  • InHealth Mutual: The Ohio-based CO-OP says it has “zero assets” tied to the risk-corridors program. InHealth wasn’t licensed in the state until September 2013 — too late to be allowed to sell coverage through the state’s federally run exchange last year. Off of the exchange, however, the company enrolled about 6,000 people. InHealth received more than $63 million in capital, which was significantly larger than the state’s initial solvency requirement of $2.5 million, says CEO Jesse Thomas. The company has a loan commitment for $50 million in additional solvency funds. The company’s business model has “deliberate low overhead and a slow and measured growth strategy,” he says, adding that InHealth uses a per-member per-month pricing model versus a fixed-cost model. That lets InHealth “incur costs only as we increase our revenues.” Thomas says InHealth’s 2015 rates are an average of 14% higher than premiums in 2014. He adds that his firm has recorded reinsurance recoverables of only about $500,000. “As a prudent and conservative business measure, we reduced the amount to be recovered by an estimate of 25% because there is no certainty as to whether the fees charged will be enough to cover the recoverables sought in the industry,” he explains. “Relative to our $50 million in surplus, InHealth is financially strong enough to survive even in the very unlikely situation that we collected none of the $500,000,” he concludes. A spokesperson for Ohio’s Dept. of Insurance declined to comment on the CO-OP’s finances.

  • Kentucky Health Cooperative: Kentucky Insurance Commissioner Sharon Clark says her office has been monitoring the Kentucky Health Cooperative (KHC) closely since its inception, “just as we would any new company.” In its first year, the CO-OP wound up with nearly double the enrollment it had anticipated…and the vast majority of those members had previously been in Kentucky Access, the state’s high-risk pool, she says. Due to the unexpectedly large number of enrollees — and resulting claims — KHC recently received an additional $65 million in solvency loan dollars from CMS, Clark says. “In addition, the cooperative decided to delay its entry into the West Virginia market and raised its rates for the 2015 plan year. All these steps were taken with the approval of the Dept. of Insurance,” she says.

  • Maine Community Health Option: Maine’s Bureau of Insurance (MBI) says the state’s CO-OP reported higher-than-expected enrollment in 2014. “The bureau views the company’s initial experience as being good, to date, with sufficient access to capital. More will be known, however, as 2015 unfolds,” says MBI spokesperson Doug Dunbar.

© 2015 by Atlantic Information Services, Inc. All Rights Reserved.

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