The Iowa Insurance Division said Friday that not-for-profit health insurer CoOportunity Health could not be saved and ordered its liquidation by the end of February.
Iowa’s decision comes roughly a week after Tennessee’s co-op insurer, Community Health Alliance, froze all enrollments, signaling that it was having its own issues.
The death of CoOportunity and the pressure surrounding Community Health Alliance demonstrate the difficulties new insurers face attempting to enter a marketplace that has traditionally been dominated by household names, said Sabrina Corlette, a lawyer and senior research fellow at Georgetown University’s Center on Health Insurance Reforms. The challenge is a major one for co-ops, which were created and funded by the Patient Protection and Affordable Care Act.
“It’s not for the faint of heart,” Corlette said.
Iowa Republican Sen. Chuck Grassley sent a letter to the CMS (PDF) earlier this month, demanding answers to how CoOportunity could have faltered. Congressional Republicans have criticized Obamacare’s co-ops as a waste of taxpayer money. Some have compared them to Solyndra, a solar-panel company financed through public money that went belly up in 2011.
Supporters of co-ops, however, say it’s difficult to draw conclusions from one failed attempt. “The news about CoOportunity Health is not a statement on the health insurance co-op program or the co-op concept; it’s a reflection on the fact that all insurers—not just co-ops—are operating in unique markets with unique business plans and varying state regulations,” Dr. Martin Hickey, board chair of the National Alliance of State Health Co-Ops, said in a statement.
Corlette agreed, saying CoOportunity’s closure and Community Health Alliance’s enrollment freeze are not an indictment of the entire co-op effort.
“When you’ve seen one co-op, you’ve seen one co-op,” Corlette said. “I’d be cautious about necessarily assuming that they are all in the same boat, or have the same cash flow issues.”
CoOportunity’s demise officially started Dec. 24, when Iowa Insurance Commissioner Nick Gerhart took over the insurer and studied it to see if it could be saved. CoOportunity, which enrolled many sick, higher-cost people, lost $45.7 million in the first 10 months of last year, and predicted it would not receive $60 million under the ACA’s risk-corridor provision.
Iowa’s insurance department said Friday that CoOportunity’s “medical claims currently exceed cash on hand.” The company’s assets will be liquidated by Feb. 28, and its more than 100,000 members have until March 1 to find an alternative health plan. The ACA’s normal open-enrollment period for this year ends Feb. 15. Members’ premium and cost-sharing subsidies will stop if they do not find a new carrier, the state said.
Iowa has three other options—Aetna’s Coventry Health Care, Avera Health Plans and Gundersen Health Plan—but Coventry is the only option in several larger markets. Wellmark Blue Cross and Blue Shield, the state’s largest insurer, does not sell exchange plans and instead has benefited from the ACA provision that allows consumers to keep non-grandfathered health plans until 2016.
In Tennessee, Community Health Alliance said last week that individuals and small groups could no longer buy its health plans based on its “financial conditions and projections.” The freeze, expected to last at least six months, does not mean the state has taken over the alliance, which is still able to pay its medical claims.
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