Consumer operated and oriented plans (CO-OPs) might be in financial trouble, based on a new report that all but one of the 24 nonprofit insurers created under the Affordable Care Act (ACA) experienced losses through the third quarter of last year.
Insurance rating firm A.M. Best found that CO-OPs' losses worsened as the year went on. Aggregate underwriting losses reached almost $244 million through the third quarter, compared to about $72 million in the first quarter, according to its report. Because of this, A.M. Best said it's "concerned about the financial viability of several of these plans."
In fact, two CO-OPs already are under financial stress. Iowa's insurance commissioner seeks liquidation of CoOportunity Health because the company doesn't have enough money to handle member claims, while Tennessee's Community Health Alliance pulled its plans off the state's health insurance exchange by freezing enrollment for the rest of the year, FierceHealthPayer previously reported.
Andrew Edelsberg, one of the report's authors, told CNBC that seven CO-OPs had outstanding, long-term federal loans that were more than 100 percent of their capital and surplus last year. "Now, they're all over 100 percent," he said. Fifteen CO-OPs have loans totaling more than 200 percent of their assets.
Among A.M. Best's concerns: CO-OPs only have premiums being paid by a collective 523,000 members, which amounts to less than 8 percent of total ACA enrollment. That means some of the CO-OPs, especially the ones that priced their plans low, may be experiencing higher utilization and, therefore, higher medical costs, CNBC noted.
CO-OPs "are start-up companies. Any start-up business enters a market with an inherent risk of building a business from the ground up," Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, told CNBC.
"CO-OPs were never intended to achieve immediate and uniform financial success," said Kelly Crowe, executive director of the National Alliance of State Health CO-OPs. "Indeed, success will be better measured once they all have several years to operate on the marketplace and enroll members."