Kentucky Health Cooperative (Kentucky’s consumer operated health co-op) will close its doors by the end of the year, due to the loss of the federal risk corridor funding it relied on. It is one more reason to question the lifespans of state health co-ops. Is Kentucky one more nail in the co-op coffin? Maybe they will join the ranks of the illustrious, promising, yet extinct, remedies to health exchanges. Co-Ops were allowed for by language in the Affordable Care Act (ACA), in lieu of its objective: Increase the competition and choice in the health insurance plan marketplace for individual consumers. Alas, the short history of co-ops is bleak. A recently published report from the Office of the Inspector General (OIG) tells a sad story for the promise of the state co-op; 21 out of 23 co-ops surveyed failed to meet their stated enrollment & profit goals.
The same OIG report goes on to list some of the challenges co-ops face. It seems that their difficulties include integral variables, like enrollment numbers, failed technological imperatives, and overall net revenue loss. Of the co-ops reported on, a full thirteen showed substantially fewer than anticipated enrollment numbers, with some (like Illinois, for instance) reaching a disappointing 4% of their projected enrollment figures. When the marketplace opened, many prospective enrollees reported difficulties trying to use the marketplace website due to crashes, long wait times, and an inability to capture all the information submitted by the consumers.
One particular co-op experienced delays obtaining licenses, which rendered them inert, incapable of placing their health insurance plans onto the marketplace. Several co-ops actually over-priced their plans; offering the exact same plans at much higher rates than competitors – competitors that also held sway with familiar brand names. Needless to say, the co-op deaths knell hath rung!
Sudden death looms on the co-op horizon; although a few co-ops, including Kentucky Health Cooperative, met its member projections, they faced a challenge supporting unhealthy members signing up for health insurance for the first time, and therefore paying for more claims than anticipated. Unfortunately for co-ops, their dependence upon government support has left them unsupported, despite the original 2.4 billion dollar [ACA-mandated] investment by Uncle Sam. Thus far, we have witnessed the demise of co-ops in states including Kentucky, New York, Nevada, Iowa and Louisiana. How many more co-ops are doomed to close?
Not every state co-op has failed. According to the OIG report, Maine Community Health Options has a positive profit margin. In an interview with Kevin Lewis, CEO of Maine Community Health Options, by Modernhealthcare, Lewis says, “One thing we found to be crucial to our first year was being as close to the members as we could in terms of having the call center in-house. We found it essential to have that call center within our four walls so we could be close to the friction points where there were service issues and address them quickly.” The deal breaker for fledgling state co-ops might be centered in Customer Experience.
Still despite the great customer experience Maine’s co-op gives, can the remaining co-ops survive these turbulent times? If they do they will have to remain competitive in the marketplace while simultaneously not relying on the ACA’s risk-corridors program.