Tag Archive: CoOportunity Health

Two new CO-OP plans face dreaded adverse selection death spiral

Before individual health insurers were prohibited from medically underwriting applicants for coverage one year ago this month, many faced the dreaded adverse selection death spiral and may have gone under without the intervention of the Patient Protection and Affordable Care Act. That’s when a health insurer ends up with less healthy people in its risk pool and must raise premium rates and cost sharing to cover their higher medical utilization costs. Those higher premiums in turn make the plan less able to attract new members and premium dollars to cover those rising costs. Once the adverse selection death spiral becomes established, it’s very difficult to reverse course. It’s the health insurance equivalent of a cosmic black hole.

The Patient Protection and Affordable Care Act sought to mitigate the death spiral by outlawing medical underwriting in individual health insurance, subsidizing premiums for low and moderate income households, creating single state risk pools and establishing reinsurance and risk adjustment programs to mitigate adverse selection risk.

But for some new health plans in the post-ACA world, adverse selection can occur right out of the gate if they can’t coordinate premium rates and cost sharing with medical utilization. Exhibit A is a couple of CO-OP (Consumer Operated and Oriented Plan) health insurers established under Section 1322 of the Affordable Care Act. Since CO-OP plans are new players in those states in which they operate, they face the temptation to set premiums at low levels in order to gain market share against the established health plan issuers.

Two days before Christmas, Iowa insurance regulators went to court to place Iowa and Nebraska-licensed CoOportunity Health in rehabilitation, citing “extremely high healthcare utilization.” The week before, the federal government declined CoOportunity Health additional loan funding, resulting in CoOportunity being deemed in hazardous financial condition and placed under the supervision of the Iowa Insurance Division. (Links related to the rehabilitation order here.) (Update 1/24/15: Iowa insurance commissioner initiates insolvency proceedings against CoOportunity.)

Meanwhile in Minnesota, another CO-OP plan, PreferredOne, sharply increased premium rates and pulled out of that state’s health benefit exchange marketplace for plan year 2015 despite a bang up 2014 in which it captured a majority of the 55,000 new exchange enrollees, according to this Bloomberg Businessweek story. Same problem as in Iowa with CoOportunity Health: premiums set too low relative to medical utilization.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Iowa governor exploring interstate health benefit exchange with 3 adjacent states

Iowa Governor Terry Branstad wants to confer with governors of three neighboring states about setting up an interstate health benefit exchange marketplace. Iowa and the other states –South Dakota, Nebraska and Kansas — have opted to have the U.S. Department of Health and Human Services initially operate their exchanges.

Branstad reportedly cited the fiscal benefit of sharing exchange operating costs and the presence of Iowa health plan issuers Wellmark Blue Cross and Blue Shield and CoOportunity Health in the other three nearby states.

Section 1311(f) of the Patient Protection and Affordable Care Act authorizes the operation of “Regional or Other Interstate Exchanges” operating in more than one state, subject to the approval of the involved states and the federal Department of Health and Human Services.

The Quad City Times has the full story here.

See also this analysis of Affordable Care Act provisions that would enable less populous states like Iowa to join with other states to form larger pools of potential individual enrollees, generating better spread of risk for health plans and increasing the purchasing power of exchange member states with plan issuers.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

%d bloggers like this: