Maine’s only co-op insurance company — Community Health Options — reported a $31 million loss last year. It’s a major blow to an entity that not long ago was highlighted as a rare success story in the new, nonprofit health insurance market.
2015 was not a good year for Community Health Options.
“I think 2015 really was a surprise for most all carriers,” says CEO Kevin Lewis.
He says what’s surprising is how much people actually used their insurance to get health care, and the high pharmacy costs that accompanied that usage.
“I don’t know of a single plan that’s been profitable or had net positive revenues in 2015 on the individual marketplace,” Lewis says.
Community Health Options didn’t anticipate such high usage when it locked in premiums well in advance. And its financial strain is expected to continue for 2016 — with a projected additional loss of $43 million.
“We do have reserves,” Lewis says, enough to cover these combined losses.
Community Health Options has also cut its administrative costs. It’s negotiating discounts with providers. It’s trying to ensure members receive appropriate care to produce the best health outcomes at the lowest price. And the co-op is also planning to increase premiums.
“Certainly, 2017 pricing needs to be reflective of our anticipated utilization,” Lewis says.
Emily Brostek of Consumers for Affordable Health Care says while the news about Community Health Options isn’t good, she’s heartened that the company is taking proactive steps and that the Maine Bureau of Insurance is monitoring the situation closely.
“And I would also just remind people that the tax credits on the Marketplace, if you qualify for financial help, will protect most people from big premium changes,” she says.
It was just a year ago that Community Health Options was a rising star — make that the only star — in the co-op insurance market.
In Jan. 2015, the rating agency AM Best found Community Health Options was the only co-op out of 23 across the country that wasn’t losing money. It has consistently secured about two-thirds of enrollees in Maine’s online marketplace. Last year, it won a federal loan to expand into New Hampshire.
Despite those initial successes, Georgetown University research professor Sabrina Corlette says the co-op’s current fiscal challenges aren’t surprising.
“The health insurance market is an extremely difficult one for a new company to enter,” she says.
Corlette is one of the authors of a recent report published by the Commonwealth Fund about why so many insurance co-ops are failing. Twelve have closed; 11 remain.
“The No. 1 problem is actually building a provider network,” she says.
Corlette says before the Affordable Care Act’s online marketplace, Maine was largely dominated by one insurance carrier, and that’s a difficult market to break into. In most cases, she says, it takes deep pockets and years of selling at a loss until insurance companies can build up enough enrollments to stand on stable financial ground.
She says decisions in Congress have also added to co-ops’ challenges.
“Decisions that rolled back funding for the program, that cut some anticipated injection of financing that they were supposed to get last year,” Corlette says.
To make it in the insurance market, she says, co-ops largely have to find their own way. Diversifying into other markets, like selling to employers, would likely help.
Corlette’s report concludes that if any co-ops come to thrive in the new marketplace, it will be against substantial odds. But she says she expects at least a couple survivors, and says the leadership at Community Health Options is strong.
