When Obamacare’s marketplaces went online in 2014, the Obama administration created 23 small insurers to boost competition on the law’s insurance exchanges.
Of those 23, only four now remain.
Their demise became a political talking point for Republicans, who claimed that the collapse was evidence of Obamacare’s failure. But the remaining insurers, called consumer oriented and operated plans, or co-ops, say that they are stable and will offer plans in 2019 and that they are fulfilling the original goal of boosting competition, if only for a few states.
A vast majority of co-ops closed in rapid succession back in 2015 and 2016. They failed for a variety of reasons, ranging from insufficient federal funding to misjudgment about who would sign up for Obamacare when the exchanges went online in 2014.
When the majority of co-ops collapsed, Republicans in Congress argued that their failures presaged a “death spiral” that would collapse the entire individual market, in which people who don’t get insurance through their jobs or the government buy policies, and which is served by Obamacare’s insurance exchanges.
The four remaining co-ops are New Mexico Health Connections; Mountain Healthcare, covering Idaho and Montana; Community Health Options of Maine; and Common Ground in Wisconsin. Of the four co-ops contacted by the Washington Examiner, two of them returned a request for comment: Mountain Healthcare and Health Connections.
All four will offer plans in 2019.
Obamacare’s exchanges are entering the 2019 coverage year with signs of stability. Some insurers are re-entering the market after previously suffering financial losses and leaving. The Trump administration said that it expects premiums to decline slightly next year.
“In Idaho we have taken away some market share from the big legacy [insurance] companies and the same here in Montana,” said Richard Miltenberger, president and CEO of Mountain Health. “They take us as a serious threat.”
Mountain Health’s premiums are expected to rise by 10 percent in 2019 in Montana, and the co-op covers about 22,700 residents in the state. In Idaho, the insurer will raise rates by 7 percent.
New Mexico Health Connections also said that it has worked to boost competition on the exchanges.
“We are happy to say that our New Mexico Health Connections’ rates for 2019 have seen a decline,” said spokeswoman Joanie Griffin, referring to a 2 percent decline in its 2019 rates.
A major reason several co-ops failed was that a sicker-than-expected enrollee population signed up for
Obamacare. Obamacare insurers also generally priced their plans too low in 2014 and couldn’t keep up with the high medical claims that arose from the enrollees who signed up.
The result was that small insurance startups couldn’t keep up with the high claims and ran out of money, while larger insurers could cushion the blow.
Miltenberger said that the insurer has been able to stay stable because it built slowly.
“The folks who preceded me were very wise and made a point of not growing too quickly and didn’t become technically insolvent by outgrowing their capital,” said Miltenberger, who has helmed the insurer since May of this year.
But another key factor in the co-ops’ early struggles was the ineffectiveness of federal programs to help prop up insurers to help them adjust to the new Obamacare marketplace.
For instance, the program called risk adjustment forces insurers who have a healthy risk pool to pay the federal government, which in turn distributes those funds to insurers that have a sicker insurance risk pool. The goal is to spread around risk among Obamacare insurers.
However, New Mexico Health Connections has sued the federal government multiple times on the grounds that the formula used to determine payments into the program was flawed.
The co-op cited several other co-ops that shut down due in part to the risk-adjustment program. HealthyCT, a co-op based in Connecticut, shut down after having to pay $13 million in risk-adjustment payments in 2015, and the Illinois co-op Land of Lincoln Health had to pay $32 million in risk-adjustment payments.
Open enrollment for Obamacare starts on Nov. 1 and runs through Dec. 15 on healthcare.gov, which is used by 38 states for residents to buy Obamacare plans. The deadline for the end of open enrollment will vary among the remaining 12 state-run exchanges.
