The co-ops under Obamacare were previously considered to be the most significant downfall of the healthcare law.
The government provided $2.4 billion to 24 nonprofit insurers in hopes of increasing competition in the emerging healthcare market. However, within four years, the majority of these insurers failed, losing money and leaving many patients without coverage.
However, ten years following the chaotic introduction of the Obamacare markets, there are three unexpected survivors experiencing significant growth in enrollment. These organizations are bringing much-needed competition to sparsely populated areas of the country with older demographics, which may not be appealing to commercial insurance companies. Despite no longer operating in certain states, these nonprofits had a significant and favorable influence on competition and pricing during the tumultuous early years of the Obamacare markets.
John Morrison, a former insurance commissioner in Montana, stated that even though the majority of them had a lifespan of only two years, they were able to generate more savings for taxpayers and consumers than the total cost of the program. Morrison played a role in launching Mountain Health CO-OP, one of the remaining three insurance companies, and also served as the president of the now-defunct National Alliance of State Health Co-ops. He also added that despite the circumstances, the outcome of the program ultimately resulted in profits for the American public.
As the 11th open enrollment period for the Affordable Care Act approaches, Republicans have largely stopped discussing the possibility of repealing the law, acknowledging its significant presence in the healthcare system. This year, enrollment numbers reached an all-time high, thanks to the efforts of the Biden administration and a Democratic Congress that offered additional subsidies after the previous administration’s failed attempt to dismantle the law. The co-ops, previously seen as a sign of poor organization and excessive ambition, now serve as a testament to the law’s durability.
The three cooperatives, Mountain Health, Community Health Options, and Common Ground Healthcare Cooperative, are financially stable. They have remained profitable in the first half of this year and have experienced a 40% increase in enrollment over the past two years.
In 2020, the U.S. Supreme Court granted them the right to receive around $12 billion in extra payments. However, this was a hollow victory for the majority of nonprofit startups as they had already ceased operations.
According to Morrison, a former insurance commissioner in Montana, the co-ops were not unsuccessful. Instead, they were deliberately terminated.
There is evidence suggesting that although some non-profit plans were unsuccessful, they still had a positive impact on competition and prices in the emerging market. A study conducted by the National Alliance of State Health CO-Ops found that in the 23 states with co-ops plans (including two in Oregon), premiums were on average 8.4 percent lower in the first year of operation compared to states without co-ops.
Each of the three remaining co-ops faced almost catastrophic situations, and it took a stroke of luck and external aid to help them recover.
The Maine co-op experienced a financial downfall in the latter half of 2015, resulting in a deficit of approximately $70 million at the end of the year. In collaboration with the state regulator, Community Health Options devised a strategy to reduce expenses and maintain stability. This included renegotiating contracts with two prominent healthcare systems, changing pharmacy benefit managers, and implementing a 10 percent salary reduction for top employees.
In 2016, Wisconsin’s Common Ground Healthcare Cooperative faced a grim outlook for survival. The insurer’s deficit from risk corridors payments had reached over $100 million.
Mahaffey expressed concern about his employees potentially losing their jobs and members losing the valuable option of a nonprofit cooperative.
In the end, the insurer sold off potential future risk corridor payments for $30 million in order to secure a payment. This resulted in a decrease in overall funds, but it allowed the company to avoid regulatory concerns about financial stability and continue operating.
In the fiscal year of 2016-17, St. Luke’s Health System in Boise provided a “surplus note” of approximately $8 million to Mountain Health, which was essential in keeping the business operational.
“They wanted the competition in Boise, and they saw that we were good players,” said CEO Richard Miltenberger. “We’ll forever be grateful to those folks and we did pay them back as quickly as we could.”
There are many insurance professionals who still view the co-op program as a mistake. Joe Antos, a health policy expert at the conservative American Enterprise Institute, argues that strategies to increase competition in the Medicare Advantage market have been more effective by incentivizing current insurers.
According to Antos, it is wiser to invest in established companies that have experience in the insurance industry. Attempting to launch a new business is a significant challenge, as shown by the failure of the co-op program.
Complimentary insulin and psychiatric treatment.
The latest financial reports for the three remaining cooperative businesses show that they are in a stable financial position.
During the first half of this year, Mountain Health made a profit of $7.3 million. The co-ops in Maine and Wisconsin also had positive earnings, with $3.8 million and $13.3 million respectively.
In recent years, there has been a considerable increase in enrollment for all of these organizations. This can be attributed, in part, to the increased federal subsidies available for customers under Obamacare. Both Mountain Health and the Maine co-op have experienced a surge of about 50 percent in membership since 2021. Common Ground was not far behind, with a 33 percent increase in enrollment.
The remaining co-ops have remained stable, unlike some for-profit insurers that were established during the same period. In June, Friday Health Plans announced its closure due to significant financial difficulties. Similarly, Bright Health announced in October 2022 that it would be leaving the Obamacare markets due to financial strain. On the other hand, Oscar Health, initially praised as a technologically innovative disrupter, has faced billions of dollars in losses over the past ten years and has withdrawn from multiple states.
According to Duke’s Anderson, being an insurance company is a challenging endeavor. This difficulty is compounded for health insurance companies operating in the ACA market.
The current cooperative organizations demonstrate a range of methods in which they have positively impacted their respective markets, going beyond just enhancing competition.
For instance, the Maine co-op has initially provided its members with three complimentary appointments for behavioral health services.
Kevin Lewis, the CEO of Community Health Options since its beginning, stated that this highlighted the importance of early intervention and prompted others to do the same.
Mountain Health also provides insulin for free to its members who have diabetes, which would have otherwise resulted in them having to pay out-of-pocket. Miltenberger believes that this decision ultimately leads to cost savings, as patients would have potentially limited their use of the drug and could have ended up with more expensive health issues.
According to him, the majority of our members are individuals with lower incomes. I hope others will follow our example, as it has been very beneficial for our members thus far.
The Montana insurance commissioner, Downing, attributes the co-op’s ability to survive to a cautious strategy that prioritized financial stability over quick expansion of membership.
The current belief is that they are operating conservatively and will continue to be a viable choice for consumers and agents in Montana for a significant amount of time. According to him.