Joel Peyton and Betsy Dooley
Nonprofit, consumer-run health plans are supposed to be one of the options for affordable health insurance beginning in 2014, but the odds are not looking great: The U.S. Department of Health and Human Services predicts that as many as 40 percent of these Consumer Operated and Oriented Plans could default on startup loans granted by the federal government.
Among the challenges to CO-OPs: fierce competition from current, dominant insurers; mounting criticism from Republican lawmakers eager to trash anything related to the Affordable Care Act; and the difficulty of forming provider networks and coming up with actuarially sound rates.
Despite the risk of failure, 10 organizations have received more than $845 million to establish CO-OPs in 10 states. The goal of CO-OPs is to give the uninsured and small employer groups more affordable choices that could introduce more competition in local markets.
Each CO-OP will have a unique approach for capturing membership. For example, Freelancers Union, which is based in New York and received funding to establish CO-OPs in New Jersey, New York and Oregon, will focus on attracting individuals who are self-employed or that do contract work.
Community Care of Oregon will be administratively supported by CareOregon, a Medicaid MCO, and will go after individuals who may have recently lost Medicaid eligibility because their income increased, in addition to the uninsured and small employer groups.
In South Carolina, a CO-OP that will be offered by Consumers’ Choice Health Insurance Company will rely on brokers, its founding partners, a business coalition, and the chamber of commerce to attract small businesses and individuals.
Each proposed CO-OP’s ideas look good on paper, but they must first establish provider networks with unit costs that are comparable to those of other carriers in the market and offer plans with competitive premiums that give enough cushion to pay for costs associated with member medical risk. Some may decide to outsource health plan operations, as Freelancers Union has done with Providence Health Plan. Big players like Blue plans and UnitedHealthcare will be able to smell blood in the water if these small CO-OPs make operational mistakes.
Before CO-OPs even get a chance to test their viability, political squabbling in Congress could derail the plans; already, Congress has cut funding from $6 billion to $3.4 billion.
To make matters worse, Republicans on the House Energy and Commerce Committee are trying to defund CO-OPs, while launching an investigation into the validity of the loans that have already been dispersed to organizations.
CO-OPs are a noble concept with lofty goals and big ideas. But, in reality, politicians or crafty carriers may squash the concept before it really ever has a chance to get out of the gate.