logo
Donate
    • Magazine
    • Membership
    • Donate
  • Racial Justice
  • Economic Justice
    • Collections
    • Glossary
  • Climate Justice
  • Health Justice
  • Leadership
  • CONTENT TYPES
  • Magazine
  • Webinars
  • Membership
  • Submissions

Two More Nonprofit Insurance CO-OPs Shuttered: Implications for the ACA and Nonprofits

Rick Cohen
October 19, 2015

dead-end-coops

October 16, 2015; The Hill

Add Oregon and Colorado to the list of states whose nonprofit consumer-oriented health insurance cooperatives have shut down. Health Republic Insurance in Oregon voluntarily decided “to refrain from entering the market in 2016 and begin an orderly wind down of business” as a result of the federal announcement to limit Risk Corridor Payments to 12.6 percent of what the CO-OPs had anticipated. Colorado’s shutdown was ordered by the state Division of Insurance and protested vociferously by Julia Hutchins, the CEO of Colorado HealthOP: “We are astonished and disappointed by the Colorado Division of Insurance’s decision,” Colorado HealthOP CEO Julia Hutchins said in a statement. “It is both irresponsible and premature.”

In response to the latest news about Oregon and Colorado, Kelly Crowe, the CEO of the National Alliance of State Health CO-OPs (NASHCO) issued a statement explaining what had actually happened to cause a third of the CO-OPs to go under in rapid succession:

The dissolution of three CO-OPs this week is a devastating blow to Americans who seek competition, choice, innovative benefits, and non-profit alternatives when selecting a health insurer. It is no coincidence these announcements come on the heels of the recent notice by [the Centers for Medicare and Medicaid Services] (CMS) that only 12.6 percent of the 2014 risk corridor will be paid to insurers. Many of the CO-OPs now closing were well on their way to longer term financial sustainability, but few businesses can sustain hits like the CO-OPs and other small and new insurance companies have endured from unexpected risk adjustment obligations and much lower-than-promised risk corridor payments.

Note the phrase “lower than promised.” In their understanding of the risk corridor payments, explained last week in NPQ’s coverage of the first of this run of shutdowns, the CO-OPs had clearly anticipated much larger payments for the absorption of enrollees with significant healthcare needs. The CO-OPs were offering more-than-competitive products and pricing to people who might have been previously underinsured or uninsured. With new coverage gained through the CO-OPs, these consumers sought the healthcare they needed—as they should, and as most observers anticipated—leading to the CO-OPs having to bear high levels of expense. Blindsided by the CMS with a 12.6 percent risk corridor payment (that is, 12.6 percent of what the CO-OPs had requested), the impact on the CO-OPs’ operations was devastating and destructive.

The issue is more than just the failure of a number of new nonprofit entities. Crowe’s statement adds the following:

With HHS already issuing lower ACA enrollment projections and health insurance giants merging to further limit competition, the presence of CO-OPs is needed now more than ever. Though federal regulators have taken some modest steps to ease CO-OPs’ short term financial burdens, a firmer commitment to fulfill the obligations of the ACA’s risk programs is needed to provide stability to the marketplaces.

Sign up for our free newsletters

Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

This week’s news should not be viewed as start-up failures, but rather closures due to unfulfilled promises.

In other words, the nonprofit health insurance CO-OPs were brought into existence to do more than test the idea of seeing what a dozen nonprofit ventures might do in the health insurance field. The CO-OPs were created under the Affordable Care Act in the absence of a “public option,” much less a single-payer system, to provide price and product competition to the oligopolistic big corporations that dominated the health insurance markets across the nation. As a matter of the policy objectives of the Affordable Care Act, the federal government should have been looking at all reasonable means for sustaining the CO-OPs through their early years in order to challenge the dominance, the high costs, and the inadequate consumer care that the big corporate insurers were known for.

Despite a number of regulatory hurdles aimed at constraining the operational flexibility of the CO-OPs, the CO-OPs used their nonprofit ingenuity for reaching out to potential enrollees, building alliances with other nonprofits, overcoming restrictions on marketing by engaging in public education about health insurance and healthcare, and succeeding in many cases with enrollments beyond expectations—and despite dysfunctional state health exchanges. The CMS decision on the risk corridor payments pulls the rug out not only from the CO-OPs as organizations, but from the federal policy commitment in the ACA to resist and overcome the dominance of the likes of Aetna, Anthem, Cigna, and Humana.

It is truly embarrassing that nonprofit leadership organizations have taken the opportunity to say absolutely nothing about the unfair treatment of nonprofit health insurance CO-OPs. Perhaps it is a matter of numbers—there were only a couple dozen CO-OPs after the budget deal eliminated startup loan funds for the creation of new CO-OPs, not a large enough swath of the nonprofit sector to be seen as broadly relevant. Perhaps it is a matter of technical knowledge—the nonprofit health CO-OPs operated in the arena of health insurance, a subject which apparently exceeds the research and analysis capacities of nonprofit leadership organizations, even though it is likely that many nonprofit employees had signed up for insurance purchased through the exchanges with the CO-OPs themselves.

When the news of the risk corridor payments first came out, Crowe said in a statement,

Today’s news that risk corridor payments will be much lower than requested is another sign the so-called “3 R’s” are not working as the Affordable Care Act envisioned. CO-OPs and most new entrants were recently hit hard in risk adjustment payments, even though the populations they serve were often very high-risk. Rather than encouraging choice and competition, these ACA programs appear to be hindering the viability of new entrants to the marketplace.

The CMS decision undermines what the ACA was meant to do, and the silence of nonprofit leadership organizations contributes to a weakening of the voice, power, and credulity of nonprofits.—Rick Cohen

About the author
Rick Cohen

Rick joined NPQ in 2006, after almost eight years as the executive director of the National Committee for Responsive Philanthropy (NCRP). Before that he played various roles as a community worker and advisor to others doing community work. He also worked in government. Cohen pursued investigative and analytical articles, advocated for increased philanthropic giving and access for disenfranchised constituencies, and promoted increased philanthropic and nonprofit accountability.

More about: Cooperatives and Employee OwnershipHealth EquityHealth JusticeNonprofit NewsPolicy

Our Voices Are Our Power.

Journalism, nonprofits, and multiracial democracy are under attack. At NPQ, we fight back by sharing stories and essential insights from nonprofit leaders and workers—and we pay every contributor.

Can you help us protect nonprofit voices?

Your support keeps truth alive when it matters most.
Every single dollar makes a difference.

Donate now
logo logo logo logo logo
See comments

You might also like
“Advocacy Works”: Nonprofit Status-Stripping Measure Dropped from Republican Budget
Isaiah Thompson
Private Equity and Wheelchair Services: How to Address a National Crisis
James A. Lomastro
The Human Cost of Cutting Medicaid
Rebekah Barber
How to Reduce Economic Inequality by Expanding Employee Ownership
Julie Menter and Alison Lingane
Cancer Research in the US Is World Class Because of Its Broad Base of Funding—with the Government Pulling Out, Its Future Is Uncertain
Jeffrey MacKeigan
Endowments Aren’t Blank Checks—but Universities Can Rely on Them More Heavily in Turbulent Times
Ellen P. Aprill

Upcoming Webinars

Group Created with Sketch.
May 27th, 2:00 pm ET

Ask the Nonprofit Lawyer

Register
Group Created with Sketch.
June 26th, 2:00 pm ET

From Performance Management to Mutual Commitment

Fostering a Culture of Joyful Accountability

Register

    
You might also like
A view of the US Capitol against a blue sky.
“Advocacy Works”: Nonprofit Status-Stripping Measure...
Isaiah Thompson
Two people repair a wheelchair on a workbench at night, with tools scattered and focused lighting on the wheel.
Private Equity and Wheelchair Services: How to Address a...
James A. Lomastro
"A young woman in a wheelchair holds a handmade sign that reads, 'Don't Cut Medicaid. I depend on it!!!'
The Human Cost of Cutting Medicaid
Rebekah Barber

Like what you see?

Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.

See our newsletters

By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.

  • About
  • Advertise
  • Careers
  • Contact
  • Copyright
  • Donate
  • Editorial Policy
  • Funders

We are using cookies to give you the best experience on our website.

 

Non Profit News | Nonprofit Quarterly
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.