Better rates and website improvements could boost CO-OP enrollment

Considering the challenges they faced during the first Affordable Care Act (ACA) health insurance marketplace open enrollment period, Consumer Operated and Oriented Plans (CO-OPs) overall are doing “very well,” according to Janice VanRiper, JD, PhD, executive director and chief executive officer of the National Alliance of State Health CO-OPs (NASHCO).

The new consumer-directed, not-for-profit health plans have signed up some 450,000 members across the nation--less than the 575,000 originally forecast for their first year, but still representing 18% of all ACA exchange plan enrollees to date. While NASHCO has not established a national enrollment target for the next ACA open enrollment period, which begins Nov. 15, CO-OP organizers are cautiously optimistic.

Under-performance among CO-OPs during the last enrollment period is generally attributed to several factors, VanRiper said. CO-OPs rely heavily on Healthcare.gov and state insurance exchange websites--which were famously subject to technical problems last year--as an enrollment mechanism. Enrollment through the websites is generally expected to be much improved this year, VanRiper notes.

Although the nonprofit CO-OPs were developed in part to help ensure the availability of low-cost health plans on the exchanges, lacking sufficient actuarial data, many of them set premium rates above those of competing commercial plans. This year, with better data in hand, most CO-OPs are either cutting premiums or not raising them as much as competing commercial plans, meaning they should be attractive to consumers during the upcoming enrollment period, VanRiper says.

In addition, the Obama administration’s decision to allow anyone with insurance to keep their existing plans reduced the market for all new entrants in the health insurance market, including CO-OPs, VanRiper notes.

CO-OP plans face “the challenges of any new product entering the insurance market,” VanRiper says. Many consumers may not be familiar with the concept of an insurance CO-OP or its potential advantages for enrollees. Federal law prohibits the use of federal CO-OP funding for marketing, although some CO-OPs have raised additional capital with which to undertake advertising or marketing.  

Despite challenges, all 23 of the CO-OPs that offered health plans on exchanges last year will be back for 2015 and some are even expanding. The Montana Health CO-OP will offer coverage in Idaho. The Kentucky Health Cooperative will start selling plans in West Virginia. Minuteman Health of Massachusetts and Maine Community Health Options both are expanding into New Hampshire. InHealth Mutual will enter Ohio’s health insurance marketplace in 2015 after selling off-marketplace plans during 2014.

Because last year’s “fiscal cliff” budget agreement cut off federal CO-OP start-up funding, no new CO-OPs will be entering the market this year. However, no CO-OPs are dropping out of the market, VanRiper says.

Among the 24 organizations that have applied for ACA CO-OP funding, only one, the Vermont Health CO-OP, is not operational. The Centers for Medicare and Medicaid Services (CMS) recalled the Vermont cooperative’s federal loans in September 2013--before the opening of the ACA insurance exchanges--after state regulators refused to issue the CO-OP an insurance license. Regulators doubted that the CO-OP could attract sufficient membership with the state moving to establish a single-payer insurance program in 2017.

CO-OP critics, including U.S. Rep. Darrell Issa, chair of the House Oversight and Government Reform Committee, have expressed concern that CO-OPs may not be able to repay their government loans, leaving taxpayers with a sizable bill, or may dissolve, leaving beneficiaries with unpaid medical bills.

Federal CO-OP start-up funding provides separate loans for working capital and to meet state solvency requirements. Repayments for both classes of loans are not required for five years. For that reason, CO-OPs are generally expected to have little trouble meeting state solvency requirements, maintaining operations, or paying claims through 2017.

VanRiper reports that all of the nation’s ACA CO-OPs are currently meeting state solvency requirements and “absolutely” will be able to repay the loans provided by the federal government.

“If there were any danger of that, plans would already be talking with CCIIO [Center for Consumer Information and Insurance Oversight], the agency within CMS that regulates CO-OPs, and none are,” VanRiper said. All CO-OPs have been submitting required state and federal filings in a timely manner, she adds.

However, internal government reviews and a federal audit suggest 10 or more CO-OPs may encounter financial problems.

Attracting sufficient enrollment this year to maintain fiscal viability will be important, VanRiper acknowledges. In addition, first-year enrollment results among the nation’s health insurance CO-OPs has been “varied,” she says.

Nine of the nation’s 23 CO-OPs met or exceeded targets for their first open enrollment period, according to an analysis by the Wall Street Journal, with several greatly exceeding expectations. Those nine accounted for the overwhelming majority of CO-OP enrollment for 2014, with several under-performing CO-OPs substantially missing targets.

Surpassing expectations

Among those surpassing enrollment goals during their initial enrollment period was Health Republic Insurance of New York (formerly the Freelancers Health Service Corporation) cooperative, which is often cited as the nation’s most successful ACA CO-OP. The CO-OP had some 112,000 enrollees as of April 2014--compared with a goal of 30,000--attracting 19% of those who purchased insurance through New York State of Health, the state’s ACA insurance marketplace.

The CO-OP offered some of the lowest premiums on the exchange. It was developed by the Freelancers Union, an association of independent New York workers, which has been offering a highly popular health insurance program for decades. However, the union recently spun off the CO-OP as a separate entity and sold its traditional insurance program to Empire BlueCross BlueShield.

Others exceeding their expectations include Maine Community Health Options, which attracted 44,000 members--more than 80% of the exchange plans purchased by Mainers for 2014. CoOportunity Health has more than 85,000 members in Iowa and Nebraska. The Kentucky Health Care Cooperative is also widely cited as a CO-OP success story. The CO-OP captured 75% of the business on Kentucky’s health insurance exchange during its initial open enrollment period.

Among those pretty much hitting enrollment projections were the Montana Health CO-OP with 5,400 enrollees, and Colorado HealthOp, which garnered about 10% of exchange enrollment in its state. New Mexico Health Connections enrolled about 10,000 members. The Nevada Health Cooperative, hampered by problems with the state’s malfunctioning Nevada Health Link exchange, fell a bit below its enrollment goal, despite signing up 37% of the 13,000 Nevada residents who purchased insurance through the exchange.

Among the CO-OPs facing challenges is Illinois’ Land of Lincoln Mutual Health Insurance Company, which enrolled just 2,451 members and lost more than $4 million in its first quarter of operations. Over that period, the Chicago-based insurer recorded $1.9 million in premium revenue against $6.1 million in expenses, including $1.6 million in payments for medical services and prescription drugs and $4.5 million in claims adjustment and administrative expenses, according to a filing with the National Association of Insurance Commissioners.

Massachusetts’ Minuteman Health, Inc. is re-launching, after attracting about 2,000 members against projections of 37,000. Massachusetts Health Connector’s website failures presented additional problems. Because of technical glitches, officials allowed 300,000 residents to enroll in temporary Medicaid and another 100,000 to remain in the state’s Commonwealth Care program for another year--thereby reducing the potential market for Minuteman’s products.

CO-OPs everywhere will be aggressively pursuing membership growth during the upcoming marketplace enrollment period, VanRiper says. However, enrollment is not the sole measure of success, she adds.

CO-OPs were included in the ACA to provide additional competition for commercial plans in health insurance exchanges and exert downward pressure on premiums. For 2014, premiums for all health insurance exchange plans were 9% lower in states with CO-OP plans, compared with states having no CO-OPs, according to NASHCO.

A McKinsey & Company report found that CO-OPs offered the most products among all new insurance companies in the marketplaces, creating more choices for consumers. The same report showed that CO-OPs offered 37% of the lowest priced plans in the states in which they operate, and were the most likely of all insurers to have plans within 10% of the lowest priced option. Savings realized from lower premiums could be in the billions for both consumers and taxpayers as a result of fewer subsidies paid out, according to NASHCO.

“CO-OPs and HMOs exhibited significantly lower premiums than other plan types,” Amy Burke, Arpit Misra and Steven Sheingold say in a June research brief from the U.S. Department of Health & Human Services Office of the Assistant Secretary for Planning and Evaluation.

Although CO-OPs are intended to appeal to price-conscious consumers, most CO-OPs reported that their members generally have selected premium-level plans, according to NASHCO.

CO-OPs are intended to facilitate development of a more patient-centered healthcare system, VanRiper says. As defined in the ACA, CO-OPs must be consumer-directed, with a majority of board members being premium-paying plan enrollees. All 23 CO-OPs will meet that requirement this year. Many have already held board elections and some boards are composed entirely of CO-OP members.

Proponents believe that consumer orientation ultimately will be a key factor in making CO-OPs a force in the healthcare insurance marketplace. “When you have that kind of direct consumer input to the plan management, you really know what your consumers want,” VanRiper says.

The ACA also stipulates that CO-OPs should facilitate high-quality, patient-oriented care--a requirement they have begun to meet in just their first year of operation, VanRiper says. Coordinated care is heavily emphasized by virtually all CO-OPs, with one maintaining its own network of four patient-centered medical homes (PCMH) and others maintaining relationships with one or more PCMHs.

Many CO-OPs offer provider incentives for coordinated care and have integrated behavioral health services. At least one has medical homes with a behavioral health component. Another offers beneficiary incentives for early utilization of behavioral care resources, she says.

Bob Pieper is a freelance healthcare writer based in St. Louis.