Not-for-profit insurance co-ops captured an Obamacare spotlight recently after CoOportunity Health, the co-op serving Iowa and Nebraska, officially received its death sentence from the state because of its troubled financial condition.
But CoOportunity Health is far from the only struggling co-op. Ratings agency A.M. Best Co. released an analysis in January detailing the financial operations of the 23 co-ops scattered throughout the country, including CoOportunity. More than 500,000 people have selected a health plan from a co-op, which were seeded with loans called for by the Patient Protection and Affordable Care Act.
The picture looks bleak, according to the A.M. Best report. Combined, the co-ops lost more than $240 million as of Sept. 30. Only one co-op, Maine Community Health Options, posted a surplus through the first three quarters of 2014.
The ratings agency said it is “concerned about the financial viability of several of these plans,” especially those that are banking on receiving risk-corridor payments from the federal government.
Risk corridors, part of the ACA, were designed as a way to help exchange insurers that attracted an inordinate amount of sick, costly members. Republicans in Congress passed a budget in December that could limit how that program works.
However, co-ops have “injected welcome measures of choice and competition into the health insurance marketplace” and have already overcome a lot of financial pitfalls, according to an article published Thursday in JAMA.
Co-ops were expected to appear in every state and were originally allocated $6 billion. But numerous fights in Congress cut those goals in half.
Dr. Eli Adashi, former dean of medicine and biological sciences at Brown University and co-author of the JAMA article, said in an interview it's not easy for startups like the co-ops to compete with “the giants that are currently ruling the market.” They are operating under tight budgets, and when something goes awry, “there aren't all that many options for them in terms of course correction,” he said.
But the future of the co-ops remains “promising if uncertain,” he argued, because they have, at the very least, encouraged more competitive pricing in the exchanges.
“The market will determine whether or not they have the right stuff,” Adashi said. “We do think the potential is still there.”
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