LEWISTON — Nearly half of the country’s health insurance co-ops have shut down or plan to by the end of the year, most after getting word this month that they wouldn’t receive the millions in federal money they expected. They realized they could not afford to stay in business.
But the head of Community Health Options in Lewiston said his co-op is under no such financial strain and won’t be among those to close its doors.
“We are looking to continue to grow,” said CEO Kevin Lewis.
Co-ops are health insurance companies run by members for members. They were created through the 2010 Affordable Care Act in an effort to increase competition among health insurers and to provide consumers with greater choice in the marketplace. Twenty-three co-ops began selling health insurance plans two years ago.
A couple faltered early on. Few performed well. Earlier this year, rating agency A.M. Best said Maine’s co-op was the only one making money.
Still, most co-ops were able to stay afloat. Until now.
Over the summer, the federal government notified all but two co-ops that a new formula meant they’d have to pay money into a risk stabilization program. Most had expected to get millions of dollars out of the program, not pay millions into it.
“It just really turned the financials of several co-ops upside down over night,” said Kelly Crowe, CEO of the National Alliance of State Health Co-Ops.
Then, earlier this month, there was another notice. The Centers for Medicare and Medicaid Services said the federal temporary risk corridors program — which was designed to limit losses by sharing risk among insurers — did not take in enough money and so it could not pay out as expected. Insurers getting money from the program would receive 12.6 cents on the dollar.
Co-ops weren’t the only insurers affected, but many were already in precarious financial situations, and for them this latest loss of money was devastating.
“It really was kind of a one-two sucker punch for co-ops that were financially fragile,” Crowe said. “They don’t have the deep pockets and deep reserves that the large, established health plans have.”
With open enrollment to start Nov. 1, closure announcements have surged in recent weeks.
“There were some that really felt they could make it through open enrollment, but then what happens in May, June, July, September of next year when there’s more challenging news or more hurdles to overcome?” Crowe said.
So far this year, 10 of the 23 co-ops have either shut down or plan to soon.
Community Health Options’s CEO said Maine’s co-op will not be among them.
“Some were reliant on getting that infusion of capital to shore up their financial situation, but we didn’t need it,” he said.
Lewis said Community Health Options paid into the risk corridors program, but did not count on getting money out. He said the co-op’s financial situation is good and its viability is “quite strong.”
While other co-ops around the country struggled to attract members, Community Health Options never had that problem. Eighty percent of Maine plans sold on the insurance marketplace at HealthCare.gov were Community Health Options plans.
Community Health Options has about 73,000 members in Maine and New Hampshire. It has about 170 employees and plans to hire more over the next few weeks.
The Maine Bureau of Insurance monitors the financial status of all insurers in Maine, including Community Health Options. A spokesman said the bureau receives frequent financial reports from the co-op and will conduct its regular financial exam next year. He also said bureau staff members speak regularly with co-op staff and meet with co-op officials at least quarterly.
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