With the dirt being shoveled over the recently collapsed co-op health plans, leaders of the remaining co-ops are looking for ways to avoid the same fate. But many say they can't do it without more federal assistance and guidance.
Sick, costly patients who never had health insurance, or had it only intermittently, have battered the finances of the not-for-profit co-op plans over the past two years. In many instances, those patients received expensive cancer treatments for the first time or got a transplant.
Twelve of the Affordable Care Act's 23 co-ops have closed. Many of those closures occurred after the federal government announced it would pay only a sliver of the payments promised under the law's risk-corridor program, which was intended to help plans cover losses in the initial years of the insurance exchanges.
Some say the co-op collapse could have been avoided had congressional Republicans not stymied those payments. “I think most of them could've weathered through the other problems,” said Barbara Smith, a principal at consulting firm Health Management Associates. Smith was the founding director of the co-op division at the CMS' Center for Consumer Information and Insurance Oversight, or CCIIO.
The CMS said in 2015 it would pay insurers only 12.6% of their risk-corridor requests, leaving a shortfall of $2.5 billion. Although the feds have promised to pay out those amounts, and many insurers could sue to obtain the payments, much damage has already been done.
Arches Health Plan, the ACA-funded co-op in Utah that shut down at the end of 2015, suffered from not receiving full risk-corridor payments, said Arches CEO Shaun Greene. Although he said Arches had a relatively healthy member base, high-cost cases hammered the health insurer's coffers.
Only 200 people—or 0.3% of Arches' 63,000 members—accounted for 50% of its claims. Oncology care and organ transplants, in particular, hit Arches and other co-ops hard. Greene said there was a lot of pent-up demand from people who previously could not access affordable coverage or pay for their care out of pocket.
Consultant Sherri Huff, former chief financial officer of the still-functioning Common Ground Healthcare Cooperative in Wisconsin, echoed Greene's take. By the end of January 2014, the first full month that ACA exchange coverage went live, Common Ground had 19 members request transplants, she said.
“We saw very little of the young and healthy,” Huff said.
Arches heard from three hospitals “that indicated a willingness” to pitch in money to save the co-op because they viewed it as their “growth engine,” Greene said. But that never happened because regulators gave Arches 20 hours to evaluate the deal. Greene called it a “ridiculous request.” He also criticized the CCIIO, saying the agency “went from being a pretty good partner to being completely erratic and unreliable,” which he said could be partly blamed on congressional politics.
Conservative states that failed to expand Medicaid also played a role in the demise of some co-ops, leaders said. Utah and Wisconsin did not expand Medicaid, and the co-ops in those states consequently had many sick, low-income enrollees who would otherwise have qualified for Medicaid expansion, Greene and Huff said. Many of those people bought silver-level plans and received both the premium and cost-sharing subsidies. The poorest among them had 94% of their healthcare costs covered by their insurer and subsidies.
“The failure to have Medicaid expansion ends up putting a lot of higher-need people with very challenging circumstances into the exchange plans,” Smith said.
The short-term outlook remains bleak for many of the remaining co-ops and other small and mid-sized health insurers that sell exchange plans. The recently signed budget bill included the same risk-corridors provision from last year's deal, which requires those payments to be budget-neutral. The ACA did not require the risk-corridor program to be budget-neutral.
Still, some co-op observers said the exchanges remain on the path to viability. They suggested the CMS tinker with the risk-adjustment program and tighten the special-enrollment periods so fewer people can hop in and out of coverage. But they said the risk pool has to include more of the so-called young invincibles who use fewer healthcare services.
“The expectation was and remains that this would even out over the first couple years,” Smith said. “I still think that is largely the case. 2017 will be a better year for the plans in terms of adverse risk selection.”
But Greene hedged. “There's still a lot of bad risk out there, and it's going to be a few more years before we see stabilization in the individual market.”