Struggling CO-OPs attempt turnarounds, but they don't always work

Some of the few remaining consumer operated and oriented plans (CO-OPs) have turned to reorganization in order to survive. But for one, even that strategy has run into trouble.

CO-OPs, which were created under the Affordable Care Act and infused with federal funding to get off the ground, were meant to provide an additional coverage option on the individual marketplaces. Yet they have struggled financially, and of the original 23, only a handful remain, including New Mexico Health Connections, Montana Health CO-OP, Mountain Health (of Idaho), Maine Community Health Options and Minuteman Health.

One of the erstwhile CO-OPs, Maryland-based Evergreen Health, announced late last year that it would transition to a for-profit company owned by private equity investors in order to stay afloat.

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That plan, which had received regulatory approval, unraveled last week after the insurer’s potential acquirers claimed new financial information surfaced that “raised significant concerns” about the deal, according to the Baltimore Business Journal. Thus, the investment group—composed of Anne Arundel Health System, LifeBridge Health and JARS Health Investments—backed out.

Following that development, the Maryland Insurance Administration announced that it had issued an order that bars Evergreen Health from selling or renewing any insurance policies.

“The Maryland Insurance Administration took all possible steps to keep Evergreen in the market,” Insurance Commissioner Al Redmer Jr. said. “Unfortunately, the company’s financially hazardous condition and the failure of the acquisition to close necessitated regulatory action on our part.”

Evergreen currently covers about 25,000 Maryland residents, all of them in employer-sponsored plans. It stopped selling individual policies this year while it transitioned to a for-profit entity.

While Evergreen’s bid to remake itself has failed, another East Coast CO-OP—Minuteman Health—is beginning its own transformation. The insurer, which serves customers in Massachusetts and New Hampshire, announced in late June that it plans to shed its CO-OP identity and transition into the Minuteman Insurance Company.

The goal is to provide a “smooth transition” for members, so the CO-OP will stop writing business as of Jan. 1—the same day the new company will begin writing business.

“Forming Minuteman Insurance Company will allow us to address numerous federal restrictions and work to make our coverage available to more people,” said Minuteman Health CEO Tom Policelli.

Both Minuteman and Evergreen have blamed much of their financial woes on being required to pay large assessments to the Affordable Care Act’s risk adjustment program, which is supposed to help even the playing field for individual market insurers. In two separate lawsuits against the government, they argue that the program unfairly penalizes smaller, vulnerable insurers and benefits larger carriers.

Evergreen’s case against the government was closed in February; Minuteman’s is ongoing.

Editor's note: A previous version of this article incorrectly stated how many CO-OPs remain. In addition, the article has been corrected to specify that all of Evergreen's current customers are in employer-sponsored plans.