Is a cooperative insurance cliff on the horizon?

The decline of CoOportunity Health of Iowa and Nebraska has Obamacare critics and executives at large insurers skeptical that co-ops can ever compete.

Like other co-ops created under a loan program of the Affordable Care Act, the now defunct CoOportunity Health of Iowa and Nebraska was founded on the notion that health insurers – and Blue Cross plans specifically – had “strayed from their mission,” according to CoOportunity CEO Cliff Gold.

Gold spent 30 years with Wellmark Blue Cross and Blue Shield of Iowa and South Dakota and rose to the role of marketing vice president. He retired to San Diego in his late 50s, worked as a consultant, and was playing golf one day when an old Wellmark client, David Lyons, a former Iowa Farm Bureau Federation officer, called with a pitch he couldn’t refuse — to help start a new cooperative plan under the ACA.

Gold was in, drawn to the vision of “reinventing nonprofit health insurance,” and CoOportunity was founded in 2012.

Now that vision is fodder for ACA critics and executives at large insurers skeptical that co-ops could ever compete.

After garnering more than 120,000 members in two years, CoOportunity fell into a death spiral and state-ordered liquidation in early 2015. The insurer enrolled a lot of “high acuity” members, particularly in Iowa, where the state experimented with a Medicaid “private option” eligibility expansion and allowed pre-ACA plans to be renewed.

CoOportunity was paying out far more than it was taking in and, to make matters worse, the federal government ended up delaying risk adjustment payments by around six months, putting an expected source of revenue out of reach.

Iowa’s decision to allow non-compliant plans to continue meant that a fair amount of healthy consumers did not enroll in exchange plans. Gold estimated that as many as 200,000 Iowans, including many independent farmers, kept their coverage in renewed pre-ACA plans — many of them sold by Wellmark, which also sat out the first two years of the exchange.

As Gold saw it, Wellmark’s decision not to sell exchange plans and to keep renewing individual plans was a strategy to let the “bad risk” flock to the public exchange and competitors selling there, including the low capitalized co-op and Aetna subsidiary Coventry.

Sustainability issues

But CoOportunity won’t be the last co-op to go bust, if Aetna CEO Mark Bertolini is correct.

“We believe that the recent failure in Iowa and Nebraska is a precedent kind of transaction,” Bertolini said earlier this year. CoOportunity, he argued, “probably is not the first and also not the last of these co-ops to have issues.”

While other co-ops are still a year or more away from turning a profit and sustaining themselves, “CoOportunity’s situation was influenced by a number of unique and specific factors, and is not a reflection on the co-op program or concept,” said Martin Hickey, MD, the CEO of New Mexico Health Connections and chair of National Alliance of State Health Co-ops.

Since CoOportunity went under, another co-op, Community Health Alliance in Tennessee had its enrollment frozen as a preventive measure by the state, but there do not appear to be any co-ops with an imminent risk of collapse, according to a report by Standard & Poor's. “Some may have capital or liquidity issues, but most seem to have adequate liquidity at least to survive the near term," said Standard & Poor's credit analyst Deep Banerjee.

[Also: Provider-sponsored health plans rising to meet competition]

As of late March, more than one million Americans, drawn to typically lower premiums, have enrolled in co-op plans – especially in the first year of the exchanges.

One such co-op with strong enrollment is Land of Lincoln Health, a co-op created by a coalition of hospitals and businesses in greater Chicago. This co-op attracted 20 percent of new enrollees in the second year of Illinois’ insurance exchange. The 50,000 new members amount to more than 10 percent of the statewide individual market.

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For the 2015 open enrollment, Land of Lincoln Health dropped premiums by 20 to 30 percent and sold the lowest priced silver plan in most parts of Illinois, coming with the co-ops version of narrow networks — preferred partner plans. These plans offer members low cost-sharing for using hospital systems that are a part of the Metropolitan Chicago Healthcare Council that helped launch the co-op.

Elsewhere co-ops are trying to meet demand for a new kind of value proposition in healthcare.

Maryland’s co-op, Evergreen Health Cooperative, is operating its own primary care clinics, where members can come for personalized and comprehensive wellness, disease management and health coaching.

At the Evergreen Health Care clinics “doctors and nurse practitioners will spend twice as much time with you as in typical primary care settings, so that they can get to know you personally and focus on the things that are important to you,” the co-op boasts.

The clinics also feature care coordination, 24/7 telephone access to clinicians for urgent concerns, lab services, “customized wellness plans” and online appointment scheduling, access to test results and email with providers. Along with a traditional provider network, Evergreen is pitching the clinics as part of its health plans to individuals, employers and military veterans.

Twitter: @AnthonyBrino