Maine company among insurance startups winning share of Obamacare enrollees
By Alex Wayne, Bloomberg
Posted March 16, 2014, at 6:38 a.m. - Bangor Daily News
WASHINGTON — In Maine, the insurer that has enrolled the most Affordable Care
Act customers isnft the statefs well-established Blue Cross Blue Shield plan,
owned by WellPoint Inc. Itfs WellPointfs only rival: Maine Community Health
Options, a startup that didnft exist three years ago.
The newcomer, funded primarily by taxpayer money lent under the U.S. health
care law, has won about 80 percent of the market so far in Mainefs new insurance
exchange, exceeding its own expectations, said Kevin Lewis, the chief executive
officer.
Health law opponents predicted early on that insurance co-ops created by the
law would fail, and that much of the $2.1 billion they were loaned to get
started would be lost. Instead, the 23 co-ops that now exist nationally have
enrolled about 300,000 people in health plans by combining low premiums with a
certain homespun appeal, according to company executives.
gWefre doing really well,h Lewis said in a telephone interview. Taxpayers
face gno risk whatsoeverh that Maine Community will go under, he said. gA lot of
those early, dire concerns just need to be re-examined.h
Kristin Binns, a spokeswoman for Indianapolis, Ind.-based WellPoint, declined
to comment on her companyfs co-op competition.
The 2010 Patient Protection and Affordable Care Act refers to these new
companies as gConsumer Operated and Oriented Plans,h or co-ops. To be sure, not
all of the new companies have thrived. Some, such as Marylandfs, have struggled
to sign people up because of problems with their statefs exchange while others,
including Michigan, have set their premiums too high.
The successful co-ops gemerged as price leaders,h responsible for more than a
third of the lowest-premium plans offered on U.S. exchanges, according to an
October report by the consulting firm McKinsey & Co.
Executives from these nonprofit groups in part credit innovative benefit
designs for their success, including features that offer free doctorsf visits
and generic drugs, and even $100 gift cards for people who get an annual
physical. In Wisconsin, many customers of Common Ground Healthcare Cooperative
appreciate the companyfs nonprofit, member-governed business model, CEO Bob
DeVita said.
gTherefs a long-standing upper Midwest tradition with co- ops,h DeVita said
in a telephone interview. gI think there was a lot of pent-up demand for
that.h
In Windsor Heights, Iowa, 35-year-old Geoffrey Wood, the chief operating
officer of Startup Genome, said he signed on for the statefs co-op, CoOportunity
Health, because he had grown tired of dealing with his previous insurer, Aetna
Inc.fs subsidiary Coventry Health Care Inc.
gGiven the choice between them, as the incumbent company, and an innovative
company trying to do something different, I didnft feel like I had much choice,h
Wood said in a telephone interview. gI decided to give the new guy a shot.h
Cynthia Michener, an spokeswoman for Hartford, Conn.-based Aetna, said
Coventryfs advantages for enrollees include experience with the Iowa health-care
system and stability. She declined to discuss Woodfs case without authorization
from him.
gCoventry Health Care has served Iowans for more than two decades, and knows
the community and its health-care needs well,h Michener said in an email. gWe
have long-standing experience of providing health insurance and benefits and
helping members access care, and a track record of financial stability to pay
claims.h
About 4 million Americans have signed up for private health plans using new
marketplaces created by the law, the U.S. government says. The Congressional
Budget Office projects 6 million will enroll this year, a reduction of 1 million
from estimates before the troubled introduction of the law began in October.
It hasnft been a smooth road for some of the co-ops. The computer bugs and
errors that prevented many Americans from signing up for coverage in October and
November took a toll and, in some states, the startups continue to struggle.
Co-ops in Maryland, Oregon and Massachusetts, for instance, havenft hit their
target enrollments because their state-run exchanges still arenft functioning
well. And Vermontfs co-op dissolved in September, returning its federal solvency
loans, after state regulators denied it an insurance license, saying the
companyfs enrollment expectations were unrealistic and its proposed rates
werenft competitive.
gTheyfre finding their way to us off the exchange, fortunately,h Dawn Bonder,
CEO of Oregonfs Health Republic Insurance, one of two co-ops in the state, said
in a phone interview. She estimated the company signed up about 4 percent to 5
percent of customers using Oregonfs exchange, which had enrolled about 33,800
people by February, according to the U.S. government.
gWefre looking at 2015 as an opportunity to just do what we hoped to do in
2014 — but with a lot of experience under our belt,h she said.
At the same time, co-ops in Michigan and Tennessee havenft grown at the rate
of peers because they initially over-priced their plans relative to competitors,
spokesmen for the companies said.
g2014 is preparation, really, for f15,h said David Eich, a spokesman for
Consumers Mutual, the Michigan co-op, in a telephone interview. gWefre going to
be really engaged back on the individual market.h He said the company isnft in
danger of going out of business.
About 16 percent of the loans are for the co-opsf start-up expenses, such as
leasing office space and hiring staff, and must be repaid in five years. The
rest is to be saved to meet state regulatory requirements for insurersf
financial reserves, and is due in 15 years.
Some Republicans, meanwhile, still contend taxpayers remain at risk of losing
much of the money loaned to the companies. At a Feb. 5 hearing on the co-ops,
Rep. James Lankford of Oklahoma called the program gan investment disaster,h and
said there remains gthe possibility that American taxpayers will be left on the
hook.h
Along with Maine, co-ops have attained large market share in New York, Iowa,
Nebraska, Colorado, Kentucky, Wisconsin, South Carolina, Utah, Montana, Nevada
and New Mexico, said John Morrison, a board member and founding president of the
co-op trade group, and other executives.
New Yorkfs co-op, Republic Insurance of New York, which was founded by the
same organization, Freelancers Union, that started Bonderfs company in Oregon,
is probably the largest in the country, with more than 50,000 members. It was
second in market share to WellPointfs Empire brand on the statefs exchange as of
the end of December, according to data from the exchange, New York State of
Health.
Federal authorities have approved plans by the co-ops in Montana,
Massachusetts and Kentucky to expand into neighboring states next year — Idaho,
New Hampshire and West Virginia, respectively. The companies have received a
total of $113 million for their expansion plans, according to a government
budget document published March 4.
For a handful of co-ops, success has raised a new concern. If they enroll
many more customers than they expected, they could run afoul of state regulators
who require companies to maintain cash reserves sufficient to cover medical
claims in the event they go out of business. All the co-ops received
multimillion dollar loans from the government to fund solvency reserves, and the
size of each loan was based on projected enrollment.
The Iowa co-op, CoOportunity, which also serves Nebraska, has signed up about
54,000 members, after projecting it would enroll just 11,800 by the end of
March, said Cliff Gold, the chief operations officer.
gWe do have concerns about the solvency loans if we continue to grow at this
rate,h Gold said. The co-op was signing up as many as 1,000 people a week in
February, he said.
The co-ops have lobbied the Centers for Medicare and Medicaid Services, which
controls the loans, to make more money available for reserves. Congress capped
spending on the co-ops as part of a budget deal in January 2013, leaving $253
million in a gcontingency fund for oversight and assistanceh to the firms,
according to another budget document published March 4.
gWhile itfs still early, we are encouraged by what we have seen so far, and
we will continue to work closely with these co- ops to monitor their progress
and assess their performance,h a spokesman for the agency, Aaron Albright, said
in an e-mail.
If the co-ops continue to grow, Obama administration officials have promised
to support them, Morrison said. Morrison and co-op executives met with Health
and Human Services Secretary Kathleen Sebelius and other top administration
health officials at the White House on Feb. 6 to brief them on their
progress.
The officials told the companies that gif co-ops continue to perform well in
the years ahead, the administration will look to expand the availability of
co-ops into the remaining states that donft currently have them,h Morrison
said.