The Second Opinion

Reporters: What’s the story with Obamacare co-ops?

August 7, 2015

In January, when it was clear that Iowa-based CoOportunity Health, one of 23 co-op insurance carriers set up under the Affordable Care Act, was on the brink of failing (which it soon thereafter did), I called on reporters to take a close look at the other 22 co-ops–with special scrutiny on those that had recently received additional funds from the federal government. “What’s the story in Connecticut, Kentucky, Maine, New York, and Wisconsin, where co-ops have received solvency loans,” I asked. Co-ops (consumer-operated and -oriented-plans), a substitute for the jettisoned public option provision in the Affordable Care Act, were supposed to foster competition and keep premiums down, especially in states like Iowa with few for-profit carriers. The failure of CoOportunity “should prompt us in the press to refocus on the question of competition in the insurance marketplace,” I wrote–a topic more relevant than ever in the wake of two major health insurance mergers this summer.

In the six-plus months since CoOportunity went under, I have not seen coverage of the sort I called for. It was a busy spring, to be sure, for reporters on the healthcare beat, between Medicaid expansion and King v. Burwell, the Supreme Court case that upheld Obamacare subsidies—both of which affect many millions of people to the million or so co-op policyholders countrywide. Still, the question of “what’s the story” in the 22 remaining co-op states merits attention and reporters could have used one of several news pegs (or even red flags) dating from January on as a way into it: the January decision by Tennessee’s co-op to freeze enrollment for this year as a preventive measure to support long-term viability; a January report by the insurance rating company A.M. Best headlined, “Losses Persist at Majority of Health Co-ops;” a similar Standard & Poor’s report in February titled, “Other U.S. Health Insurance Co-Ops Could Be Going Down the Same Bumpy Road As Iowa’s CoOportunity Health;” the decision of the Louisiana co-op a few weeks ago to cease operations next January; and, last week’s report from the Inspector General for the Department of Health and Human Services detailing how enrollment and profitability at most co-ops was lower (in some cases, much lower) than projected for 2014—Maine’s co-op was the only one in the black last year. None of these various news hooks sparked more than a passing interest from the press.

Last week’s IG report raised serious questions about the financial viability of several co-ops, noting that most of them had not met their initial program enrollment and profitability projections at the end of last year, and 21 suffered net losses. Such losses as well as low enrollments in several carriers “might limit the ability of some co-ops to repay startup and solvency loans and to remain viable and sustainable,” the IG warned. In particular, it reported that the Centers for Medicare and Medicaid Services had recently placed four co-ops on “enhanced oversight” or corrective action plans and had issued low enrollment warning notices to two co-ops. The IG did not name the six co-ops put on notice and CMS has not responded to my request for the names of those six co-ops. A CMS spokesman recently told The Daily Caller to file a Freedom of Information request for the names. Shouldn’t customers of those potentially troubled co-ops—and possible future customers–have full disclosure before they choose next year’s policies? Reporters need to get on the case.

The Associated Press reported some of the IG’s findings, but its story—picked up here and there around the country–was basically perfunctory reporting about a government study. The AP did note, however, that as recently as this spring, the White House “touted co-ops as an accomplishment,” competing effectively and attracting “significant enrollment” while the IG’s report “paints a very different picture.”

In most of the states where the IG reported the largest net losses at the end of last year–Kentucky, Wisconsin, New York, Connecticut (all of which received solvency loans)–reporting on the co-ops and their potential problems has been, as far as I’ve seen, nearly non-existent. In Wisconsin, for example, the Milwaukee Journal Sentinel seems to have missed the two solvency loans the state’s co-op got at the end of last year totaling more than $51 million. In February, though, Journal Sentinel readers learned–in a piece about overall ACA sign-ups–that the the co-op was pleased with its enrollment. Last week, the Journal Sentinel missed a chance to tailor for Wisconsin readers the AP story on the troubling IG report and look more closely at what was happening locally. Coverage has been similarly scant in the other states where co-ops topped the IG’s table of net losses–Kentucky, New York, and Connecticut, which also got solvency loans in late 2014 of $65 million, $90 million, and $48 million respectively.

Interestingly, while Connecticut fell well short (20%) of its projected 2014 enrollment, New York, Wisconsin and Kentucky well-exceeded their enrollment projections—New York got five times more customers than it expected–but, as Vox’s Sarah Kliff explains here, these co-ops paid out more in claims than they took in as premium revenue. Hence: net losses. What does that mean for the people— more people than anticipated in states like New York, Kentucky and Wisconsin—who chose these carriers or may be thinking about buying these plans during open enrollment this fall? This is a question reporters should be seeking to answer.

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The rate announcements still coming from several states in coming weeks offer an opening for reporters to revisit the co-op story. Whether the co-ops’ rates are high or low compared to the rest of the pack offers some clues about their market share and perhaps even finances. State regulators last week gave New York’s Health Republic co-op an average rate increase of more than 14 percent, close to what it requested and the largest increase the state granted. Is that because Health Republic really needed it? Reporters should be asking. In July, Connecticut’s HealthyCT co-op dropped its requested rate increase from 14 percent on average to 3.4 perent, citing new cost control efforts. Such a large reduction was another signal to ask more questions—such as, is low-enrollment threatening their future?

Some important background for reporters: The mechanics of insurance solvency and pricing are tricky business, but co-ops have the unique challenge of being start-ups and having to attract enough customers to scale up their business. If they price policies too low, they’re likely to attract a lot of sick people looking for cheap coverage for expensive illnesses. If they price policies too high, customers will flock to the competition. Either way it could spell trouble. While all carriers face this dilemma, it’s especially hard for the co-ops which, unlike big insurers, don’t have other lines of business to cover large losses if they’ve priced incorrectly.

It’s too early to write off the co-ops as failures. The recent dire-sounding IG report covered 2014–year one for the co-ops–and some may see a turn for the better in 2015. Indeed, Wayne Kaminski, a senior financial analyst at A.M Best, told me that “enrollment has improved in the states with low enrollment.” Reporters: find out. (I’ve been in touch with one reporter in Louisiana who is on the case now down there). Readers deserve to know “what’s the story” with their state’s co-op option before they shop during open enrollment in November. The ticket to useful reporting boils down to talking a range of experts (not just the co-op officials), reading financial reports including the quarterly filings co-ops submit to the National Association of Insurance Commissioners, and, as it always does, connecting lots of dots.

Update, Aug. 20: A few local stories on insurance co-ops are worth noting as examples: Two recent pieces by Rebecca Catalanello for Times-Picayune, about a failed co-op in Louisiana, and an article earlier this month by Melissa Patrick for Kentucky Health News, about operating losses for a co-op there.

Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.