Mid­dle of the pack

Co-op plan pre­mi­ums sug­gest good long-term prospects

Modern Healthcare - - THE WEEK IN HEALTHCARE - Rich Daly

New, con­sumer-gov­erned, co­op­er­a­tive health plans cre­ated by the health­care re­form law face some early chal­lenges as they pro­pose rates for plans they will of­fer for the first time in Oc­to­ber. But higher-than-ex­pected pre­mi­ums sug­gest bet­ter long-term sur­viv­abil­ity, an­a­lysts say.

The au­thors of the Pa­tient Pro­tec­tion and Af­ford­able Care Act hoped the not-for-profit co-op plans would foster greater com­pe­ti­tion in the health in­sur­ance mar­ket and of­fer more con­sumer-friendly poli­cies. Since then, those plans re­ceived nearly $2 bil­lion in fed­eral loans to cover startup costs and to meet state sol­vency re­quire­ments.

In many states, one or two in­sur­ers con­trol the bulk of the health in­sur­ance busi­ness. The prom­ise of lower pre­mi­ums from co-ops was a cen­tral part of the po­lit­i­cal pitch for au­tho­riz­ing the fed­eral seed money for the Con­sumer Op­er­ated and Ori­ented Plan pro­gram.

But the early state rate fil­ings for the ex­changes show many of the co-op plans, which aim to op­er­ate in 24 states, pro­pose to charge pre­mi­ums that fall in the mid­dle of the range of pre­mi­ums pro­posed by other health plans. For in­stance, a rate anal­y­sis by the Colorado Con­sumer Health Ini­tia­tive, a pa­tient ad­vo­cacy group, found pre­mi­ums for plans of­fered by the state’s co-op, called Colorado HealthOP, will gen­er­ally fall in the mid- to low-mid­dle range of the 150 plans of­fered on the state ex­change.

Bill Melville, a mar­ket an­a­lyst at Health-Lead­ers In­ter study, a Nashville-based health in­sur­ance re­search firm, said this is sim­i­lar to the pro­posed co-op plan rates in other states that have re­leased pro­posed pre­mi­ums for plans on the ex­changes, in­clud­ing Ore­gon and Con­necti­cut. “They’re not com­ing in way lower” than other ex­change plans, Melville said.

But co-op plan ad­vo­cates ar­gue that the mere ex­is­tence of the co-op plans al­ready has low­ered the over­all pre­mi­ums that other in­sur­ers have pro­posed on the ex­changes. “If you look at pric­ing pat­terns in mar­kets that have a lot of com­pe­ti­tion, like Ore­gon and Wis­con­sin, the prices tend to be more fa­vor­able than they are in mar­kets where there is not com­pe­ti­tion,” said Bar­bara Markham Smith, who pre­vi­ously headed the co­op­er­a­tive pro­gram at the CMS.

Co-op plans and their ad­vo­cates high­lighted early chal­lenges that drove their first-year rates and in­sist they will con­tinue to strive for lower pre­mi­ums.

“The goal is to come in with the low­est pos­si­ble rate, and if they are not the low­est at the out­set, that will con­tin­u­ously be the goal,” said Jan VanRiper, ex­ec­u­tive di­rec­tor of the National Al­liance of State Health CO-Ops .

Forty-four pro­pos­als for co-op fund­ing were pend­ing at the time Congress cut the re­main­ing start-up fund­ing this year, from $3.4 bil­lion to $2 bil­lion, Smith said. The orig­i­nal al­lo­ca­tion was $6 bil­lion. Repub­li­cans urged cut­ting the money be­cause they op­posed co-op plans as po­lit­i­cal hand­outs to en­ti­ties tra­di­tion­ally al­lied with the Demo­cratic party and saw them hav­ing lit­tle chance of long-term vi­a­bil­ity.

The abil­ity to of­fer the low­est-priced op­tion for con­sumers has been com­pli­cated by early startup costs that es­tab­lished com­mer­cial in­sur­ers do not face, ac­cord­ing to lead­ers of the health co­op­er­a­tives. For ex­am­ple, co-op plans lack con­sumer name recog­ni­tion and must en­gage in heavy mar­ket­ing.

“The prom­ise of the co-op be­ing low cost is not nec­es­sar­ily a Year 1 propo­si­tion,” said Ju­lia Hutchins, CEO of the Colorado Health In­sur­ance Co­op­er­a­tive, in an in­ter­view.

Melville said the fact that the co-op plan pre­mi­ums fell into the mid-range of pre­mi­ums is a good sign for the long-term vi­a­bil­ity of th­ese new plans.

Over­all, the co-op plan rate fil­ings have given an­a­lysts con­fi­dence in their long-term vi­a­bil­ity. “We’re not see­ing them fall­ing be­hind in any ways that raise any red flags for us,” said Matthew Valeta, a health pol­icy an­a­lyst at the Colorado Con­sumer Health Ini­tia­tive, in an in­ter­view.

One ex­cep­tion is the Ver­mont Health COOP, which had its li­cense ap­pli­ca­tion re­jected by the state’s in­sur­ance reg­u­la­tor in May due to a range of con­cerns about its pre­mi­ums, pro­jected en­roll­ment and or­ga­ni­za­tional de­tails. None of the three other co-op plans still await­ing li­cen­sure is ex­pected to face the same fate, VanRiper said. She also noted Ver­mont’s co-op plan is seek­ing re­con­sid­er­a­tion of its ap­pli­ca­tion.

Rep. Dar­rell Issa (R-Calif.), chair­man of the House Over­sight and Govern­ment Re­form Com­mit­tee, is­sued subpoe­nas to HHS in June for doc­u­ments re­lated to ap­proval of the fed­eral fund­ing for many of the co­op­er­a­tives, and he has re­quested sim­i­lar in­for­ma­tion di­rectly from 13 of the 24 co­op­er­a­tives.

“It’s not a very pro­duc­tive en­vi­ron­ment” for co­op­er­a­tives in Congress, Smith said.

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