Louisiana Health Cooperative, the state's not-for-profit health plan created through the Affordable Care Act, will close by year-end. LAHC is the second co-op casualty in less than a year, and a sign that many other co-ops are on life support.
Louisiana's plan suffered from high-cost medical claims and low enrollment in the state's insurance exchange. The ACA created the consumer-governed co-op option to inject competition into the individual market. But the plans have faced steep operating challenges, including sicker-than-average members, slashed federal funding and less name recognition than larger carriers.
“These co-ops were essentially competitively disadvantaged from the beginning,” said Joseph Marinucci, a health insurance analyst at ratings agency Standard & Poor's. “They're doing business in one of the riskiest product markets where they very much lack a supplemental product line and diversity.”
LAHC asked the state for a 23% premium increase for its 2016 health plans, the highest of any insurer in the state. The company lost $5.7 million in 2014, according to state rate filings. Its medical-loss ratio was 113%, which means that for every dollar collected in consumer premiums, it had to pay out $1.13 to cover healthcare services. Prescription drugs, higher provider rates and other medical costs forced the co-op to push up premium rates.
Those pressures ultimately proved too difficult to handle, so LAHC decided to shut down operations by Dec. 31. The 16,000 Louisiana residents with LAHC coverage will have to shop for new plans during the next open-enrollment period.
LAHC “has sustained itself over the last few years, but is not growing enough to maintain a healthy future,” Louisiana Health Cooperative CEO Greg Cromer said in a news release. “By proactively and voluntarily addressing our situation now, (LAHC) will be in a position to maintain all of its policies in force through the end of the year, and to cover all outstanding claims and operating expenses.”
