Health specialists with Mercy Regional Medical Center give consumers looking for health plans another option. According to Jane Strobel, Mercy’s vice president and chief financial officer, hospital staffers are available to answer questions and help patients get covered. “While we are saddened to hear the news regarding the Colorado HealthOP ... Mercy financial counselors provide financial assistance, payment options and charity care for qualifying self-pay and underinsured patients,” she said in a statement./Courtesy photo

Risky business

Colorado’s health coop among many to close down this year

by Tracy Chamberlin

More than half are shutting down. Out of the 23 health insurance cooperatives servicing 26 states, only 11 are still standing. Twelve of the nonprofit health insurance providers created through the Affordable Care Act have announced they will close their doors at the end of this year. One of those is Colorado HealthOP.

The cause for all the closures is a shortfall in payments made under the federal government’s risk corridor program.

It’s one of three programs set up under the Affordable Care Act to deal with instabilities that were expected to surface as the health care marketplace adapted to some of the ACA changes, like new standards for coverage, new people looking for plans, specifically those who had previously been denied coverage, and new groups offering plans, including nonprofit cooperatives like Colorado HealthOP.

“Although our longer-term prospects and cash flow were both in excellent shape, some thought that without a higher surplus we were too risky for consumers,” Chuck Holum, Colorado HealthOP’s board president, said in a statement.

In the coop’s first year, they received $72 million in government-backed loans to help them get started, all of which they’ll now default on as a result of the closure.

Over the next couple of years they expected to receive payments from the Centers for Medicare & Medicaid Services as part of a risk corridor program to help them cover costs as they figured out premium rates.

Because the coops are nonprofit and do tend to offer lower premiums they can attract high-risk members, who pay less into the system than is paid out to cover their services. Some of the ACA’s risk programs were created to address those funding gaps. The risk corridor program is one of those.

This year, the 23 coops requested a combined $2.87 billion under the federal risk corridor program. In the end, they were told they would get only $362 million. The average payout was just 12.6 percent of the requested amount.

The amount came as a bit of a surprise. “Some were prognosticating there could be a shortfall,” explained Vincent Plymell, spokesman for the Colorado Division of Insurance, “This sort of shortfall was quite unexpected.”

Plymell said his office spoke to people who said the coop was a great company, and Colorado HealthOP had been meeting its minimum requirements for cash flow and funding in its first few years.

However, with the coop set to receive just a fraction of what it requested, the insurance provider would be forced to pull from its reserves to cover costs. Without those backup funds, state regulators had no choice but to force the company to close.

“It comes down to how they were counting on that money,” Plymell said.

The risk corridor program’s model was no secret, so some experts began voicing concerns early on. But it wasn’t until the Centers for Medicare & Medicaid Services missed an
August deadline, one when it was supposed to announce the total amount of payouts, that everyone took notice – including the Colorado Division of Insurance.

Moving forward, the risk corridor program will continue to make payments for the next couple of years, but the
calculations used to determine those payments isn’t likely to change.  4

The 11 state coops left standing this year will need to become self-sufficient before that deadline or face the same fate as Colorado HealthOP.

“The shortfall (this year) is something that will give any insurance company a little more pause,” Plymell said.

In addition, to Colorado HealthOP, the other two  carriers no longer available in the state are New Health Ventures and Time Insurance Co., both of which were not forced to close but chose not to offer plans for 2016. They served about 12,000 members combined.

Colorado HealthOP, on the other hand, had 112,000 members, according to the Division of Insurance.

Nearly 40 percent of Coloradans who purchased insurance in 2015 through Connect for Health Colorado, the state health exchange, are Colorado HealthOP members, according to a statement from the coop. All those members must now find a new plan by Dec. 15 or face a loss in coverage and increased tax penalties.

Members do need to continue making their premium payments and the coop will continue to pay claims through the end of the year, but coverage ends Dec. 31.

One thing to expect when shopping for a plan is an increase in price – the cost of health care is going up in Colorado and the nation. Across this state’s nine regions, the overall increase is more than 7 percent. The West region, which includes Durango, has the biggest hike – up 25.8 percent for individual plans.

“These rates represent the first time carriers had a full-year of data to inform their rates,” Colorado’s Commissioner of Insurance Marguerite Salazar said in a statement. “They are still trying to figure out what consumers want in terms of plans, deductible levels and services at a price that attracts enrollment but allows the carrier to keep the lights on and pay their bills.” 

Programs like the risk corridor were originally set up and supported with the intention of creating a more competitive health insurance marketplace and lowering costs for consumers. According to Plymell, though, when Colorado HealthOP left the market it actually brought the expected increases in the coming year down a bit.

The coop was looking at increases in premiums of 20-25 percent, which would have affected the average.

In many ways, Coloradoans have it better than other states. Unlike other rural communities losing their coop options, Colorado has lots of different carriers and plans available.

Currently, there are more than 1,000 health care plans from 20 different carriers available in the state. Only 347 of those are listed on the state exchange, however, and that is the only way to get federal tax subsidies to help cover premium costs.

Subsidies don’t necessarily mean the plans will be less expensive, though. Plymell’s advice for residents is: do your homework.

He said it’s not fun and it’s not sexy, but “it’s worth looking at the entire universe of your options.”