With a $50 million net loss heading into last fall's enrollment period for Obamacare, it wouldn't be surprising if Illinois' Land of Lincoln Health experienced the same fate as peers that have folded across the country in the past year.
The Chicago-based health insurance co-op is one of 23 spawned by the Affordable Care Act to create competition on the health insurance exchanges and force down prices. But just three years in, 12 of the 23 have closed, says Sabrina Corlette, senior research fellow at the Center on Health Insurance Reforms at Georgetown University, beset by sick and expensive enrollees, legacy insurers with deeper pockets and federal funding that has disappeared.
Iowa Insurance Commissioner Nick Gerhart oversaw the 2015 closure of CoOportunity, the co-op serving Iowa and Nebraska and one of the largest in the nation with more than 100,000 enrollees.
“They had explosive growth,” Gerhart says of the reasons behind the co-op's demise. “They had extraordinary claims that came in right out of the gate. It was . . . the perfect storm.”
If Land of Lincoln were to shutter, the Illinois Department of Insurance would either take over or monitor the company as it pays down claims. Enrollees would be offered a special enrollment period to find new health plans, and the larger insurers on the exchange, Blue Cross & Blue Shield of Illinois, UnitedHealthcare, Aetna and Humana, likely would scoop up most of their business.
Formed as an alternative to big insurers and their pricey health plans, Land of Lincoln launched during the online marketplace's 2013 debut. It had a lackluster performance that first year with around 3,600 enrollees. The co-op made a comeback in Year Two, with about 35,000 enrolling after the exchange created plans centered on Chicago-area health systems, including Advocate Health Care and Presence Health, two of the biggest in the state.
Enrollment has boomed in its third year so far to nearly 70,000 members. But so did operating losses. The co-op ended 2014 with a nearly $18 million net loss. As of Sept. 30, just nine months into 2015, that loss nearly tripled to $50.7 million on $109.8 million in revenue, according to the co-op's most recent financial statement. Land of Lincoln announced in October that it was capping enrollment in a bid to cut costs.
Then recently, the co-op said it would drop University of Chicago Medicine from its network on March 1. The Hyde Park-based system is an academic medical center that treats the sickest patients, such as those who need expensive transplants or to manage costly chronic conditions.