Health CO-OPs Stumble; Subsidies for Catastrophic Coverage Unlikely

July 10, 2014 - HighRoads

After a tough first year, CO-OPs face questions around sustainability. Developed as an alternative to the “public option,” non-profit health insurance cooperatives were created under the auspices that they would bring competition to a market long dominated by national payers.

However, many of these CO-OPs have struggled to meet enrollment expectations. Fourteen of the 23 CO-OPs reported that they did not meet their expectations during the Affordable Care Act’s (ACA) first enrollment period. For instance, in Massachusetts, Minuteman Health expected to enroll around 37,000 new members, but only saw a little more than 1,400 enrollees; in Tennessee, Community Health Alliance had only 354 sign-ups through April 1.

CO-OPs have blamed the weak enrollment figures on various obstacles during the first year, including: higher prices than some of the national payers, the administration’s decision to allow people to renew noncompliant plans, and problematic health exchange interfaces.

Disappointing enrollment figures are especially troubling given the $2 billion in federal loans supporting the CO-OPs. These loans came with back-end heavy repayment terms that require CO-OPs to pay back start-up loans within five years and the massive solvency loans within 15.

Yet not all CO-OPs have had such challenging starts. The nine CO-OPs that priced themselves competitively relative to other marketplace participants were able to gain significant market share and are poised to become influential market players (provided they can build on their early momentum).

As competition in the marketplaces increases and federal loans start coming due, the next several years will be critical to CO-OPs. If they are unable to meaningfully increase enrollments, there will be major questions about their long-term sustainability and whether their creation was a good investment on the part of the federal government.

Subsidies for Bare-Bones Plans Unlikely to be Granted.
America’s Health Insurance Plans (AHIP) recently recommended that the federal government offer subsidies to individuals buying catastrophic coverage. Currently, these plans are not eligible for subsidies under the ACA and only 2 percent of exchange sign-ups were into these types of plans.

Supporters of this recommendation believe that bare-bones plans will entice the healthy and young while keeping premiums low. However the administration is unlikely to support such a change. Many in the White House believe that these plans do not offer sufficient coverage and they are unlikely to encourage consumers to buy a health plan that they believe will leave the policyholder under-insured.

The administration may find itself in a tougher position if Republicans win control of the Senate in November, since some Democrats have proposed similar “copper plans” and Republicans have been calling for a catastrophic plan subsidy option, which makes this proposal likely to be included in any “ACA replace” legislation. In addition, if premiums rise as expected, it will add pressure on the government to offer more affordable options, and subsidies for catastrophic plans would seem a likely means of doing so.

About HighRoads

For more than 15 years, HighRoads has been an industry leader in benefits plan management and health care compliance. Its patented SaaS-based technology, The Source™, streamlines dynamic data management, optimizes workflow across the enterprise and ensures regulatory compliance.