Healthcare Business News

Reform Update: ACA funding for co-ops stirs debate at congressional hearing

By Paul Demko
Posted: February 13, 2014 - 3:15 pm ET

“Solyndra” was a frequent topic of conversation during a congressional hearing last week on consumer operated and oriented plans—or co-ops—that have received $2 billion in loans through the Patient Protection and Affordable Care Act.

A report by Republican staffers (PDF) scrutinizing the funding for the not-for-profit insurance plans described it as “eerily similar” to a government loan program that bankrolled the failed solar energy company.

“This is no Solyndra,” declared Rep. Jackie Speier (D-Calif.) at the outset of the hearing before the House Subcommittee on Energy Policy, Health Care & Entitlements.

“The reference to Solyndra … is very appropriate,” countered Rep. Jim Jordan (R-Ohio).

As those comments suggest, the hearing was more about politics than reasoned analysis. The co-op program has aroused partisan squabbling since its inception. Funding for it was included in the federal healthcare reform law in part as a sop to Democrats upset that a public option wasn't part of the bill. Republicans have pounced on the program as an ideologically driven boondoggle.

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The reality is that it's impossible to draw any significant conclusions about the financial success of the fledgling insurers operating in 23 states.

Some co-ops have achieved notable early success in the state and federal exchanges. Health Republic Insurance of New York captured 16% of customers during the first three months of enrollment through the state's exchange, despite facing competition from 15 other insurers. Likewise, Co-Opportunity Health, which operates in Nebraska and Iowa, signed up 35,000 individuals by the end of last year—nearly three times its goal for the initial open enrollment period.

But other co-ops are struggling. Most notably, Minuteman Health in Massachusetts has signed up fewer than 600 customers to date. The insurer has been hamstrung by the state's problem-plagued exchange, which enrolled just over 8,000 individuals in coverage during the first four months of operations. “It's just completely failed,” said Jim Borghesani, a spokesman for Minuteman Health, which was formed by Tufts Medical Center, Vanguard Health Systems (now owned by Tenet Healthcare Corp.) and the New England Quality Care Alliance.

Start-up insurers could be particularly vulnerable to the continued technological problems dogging some state exchanges. That's because they don't have an existing book of business to shield them from lower-than-anticipated enrollments or a disproportionately older, sicker clientele.

Roughly two thirds of Minuteman's signups have come through the state exchange. Although enrollments are paltry, the co-op is capturing about 5% of exchange business, which is what was anticipated. In addition, the insurer has already made plans to expand into New Hampshire—which currently has just one company selling plans through the exchange—in 2015.

At last week's hearing, Jan VanRiper, executive director of the National Alliance of State Health Co-Ops, attempted to caution legislators about drawing premature conclusions about the not-for-profit insurers. “The outlook really is excellent,” VanRiper said. “As with any business, however, it will take some time to reach the maximum positive capacity.”

New York insurer agrees to refund premium payments

Empire Blue Cross and Blue Shield has agreed to refund three weeks' worth of premiums to customers who had problems signing up for coverage that was supposed to begin on Jan. 1. The deal follows a probe by the New York State Department of Financial Services into complaints from customers about enrollments not being processed, unreasonably long wait times for telephone inquiries and insurance cards not being delivered. At least 15,000 customers are expected to receive refunds as a result of the agreement.

Gallup poll shows dip in rate of uninsured

The share of uninsured Americans fell to 16% in the first quarter of this year, the lowest level recorded since 2008, according to a new Gallup poll. The drop in individuals lacking coverage could simply be accounted for by fluctuations in the marketplace. But there are some indications that the federal healthcare law may be driving the numbers. The percentage of individuals reporting that they received coverage from insurance that they purchased or through Medicaid– the two areas most significantly impacted by the ACA – increased to 25.4%. That's up from 23.8% in the fourth quarter of 2013. The Gallup poll surveyed more than 19,000 adults nationwide in January and February and has a sampling error of plus or minus 1%.

Colorado exchange leader on leave after indictment

The director of Colorado's insurance exchange was placed on paid administrative leave after news surfaced that she has been indicted for stealing from her previous employer. Christy Ann McClure pleaded not guilty on Feb. 6 in federal court in Montana to eight counts of theft and fraud from a not-for-profit housing agency in Billings. A spokesman for Connect for Health Colorado told the Denver Post that the organization had performed a full background check on McClure and found no problems.

Despite progress, states continue to lag behind enrollment targets

Most states are still failing to meet enrollment targets detailed by the CMS (PDF) in September, according to a new analysis by the Associated Press. Connecticut is the nation's top performer, signing up more than twice as many individuals as targeted by the end of January. At the other end of the spectrum is Massachusetts, with just 5% of targeted enrollments during the first four months of exchange operations. Notably, six Republican-led states that have done little to implement the ACA—Florida, Idaho, Michigan, North Carolina and Wisconsin—are on pace to meet enrollment goals.

Follow Paul Demko on Twitter: @MHpdemko

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