Feds Reject State Takeover Bid For Failing Insurance CO-OP in Maine
Ongoing financial struggles at Community Health Options, the only health co-op in the state of Maine, prompted the Maine Bureau of Insurance to try to take temporary ownership of it in recent months. Community Health Options faces a $74 million deficit. But, that request was rejected by the federal government.
Maine Insurance Superintendent Eric Cioppa says by the end of 2015, he decided it was best to try to take what's called receivership of Community Health Options to help provide stability to the non-profit co-op in a volatile insurance market.
"We thought, given the number of risks that Community Health Options has on their books and their available capital, we thought it was prudent to try do what we term de-leverage a company to give them more margin."
Cioppa says Community Health Options, which offers plans in Maine and New Hampshire, has more members than it expected. Since the co-op first offered plans on the Affordable Care Act's online marketplace, its members more than doubled from about 40,000 in 2014 to about 84,000 in 2016. But for the past couple years, the co-op set premiums in advance that weren't enough to cover its costs.
"And what we had planned to do, if we got court approval, it would have been a random — both Maine and New Hampshire residents — a random selection of those members to move."
Move to plans with a different insurance company. But the federal government rejected that request. A written statement from the Centers for Medicare and Medicaid Services says that CMS proposed and supported several approaches to solving the Bureau's concerns. But CMS doesn't believe it's wise to take actions that would result in 20,000 people losing coverage.
Community Health Options supported the Bureau of Insurance's request to take receivership. But CEO Kevin Lewis says since the co-op knew it had a deficit, it's been doing more with less and is seeing positive results. He says January's net income came in $300,000 dollars more than projected.
"February is coming in in a similar fashion, and that's better than planned," Lewis says.
As the co-op faces a multi-million dollar deficit, a recent article in the Maine Sunday Telegram raised concerns over executive compensation. From 2012 to 2014, executive salaries saw five and six-figure increases. But Lewis says those came when Community Health Options achieved profitability in 2014 — the only co-op in the country to do so.
"We had a profit of $7.3 million in 2014," Lewis says. "And we provided $3 million back to our members."
Lewis says Community Health Options has preserved employee salaries, except for the executive team, which is taking pay cuts for both 2015 and 2016.
"I'll just indicate my own, which was 10 percent, which matches the premium insufficiency. Which is about a 10 percent miss in terms of what our premiums should have been relative to the actual claims costs coming in. "
Lewis says the co-op has put in place a responsible plan to continue to provide its members great health coverage. Insurance Superintendent Eric Cioppa says Community Health Options can meet its obligations for the year.
"I can't stress enough, their risk-based capital number, which is a measure of their financial health, is a healthy number right now," Cioppa says.
He says he sought receivership to ensure Community Health Options isn't in the same situation next year. He says he's continuing discussions with the federal government and is also closely monitoring the situation at the co-op.