The fate of co-ops varied widely across the country. The startup insurers that were seeded with loan money under the Consumer Operated and Oriented Plan Program of the Patient Protection and Affordable Care Act, captured huge shares of the market in Maine and Kentucky. But in many other states they struggled to compete with legacy carriers, particularly Blue Cross and Blue Shield plans. The co-ops were also tripped up by the technical problems that plagued the federal exchange and many state-based marketplaces.
In Maryland, which had a dysfunctional exchange, CareFirst Blue Cross and Blue Shield dominated the individual marketplace. The co-op there, Evergreen Health, signed up just 450 individuals for coverage. Dr. Peter Beilenson, Evergreen's CEO, attributed the struggles to “predatory” pricing by CareFirst, suggesting they underpriced plans by about $100 this year. CareFirst is by 16% for 2015.
Evergreen was more competitive in the small-group market, where it has signed up 5,000 individuals for coverage. Beilenson expects the company's individual products to be during the next open-enrollment period.
“We actually don't want to get deluged,” Beilenson said.
Oregon's Health Republic Insurance faced a similar dynamic, with Moda Health capturing more than three-quarters of exchange business in the state. But Dawn Bonder, Health Republic's president, said all exchange plans will be priced within a very narrow band for the 2015 enrollment period, with differences typically $15 or less.
Bonder believes that will allow Health Republic—which has so far signed up 8,000 customers—to convince consumers that they offer higher quality service and therefore attract a greater share of business. Health Republic will also be introducing a lower-cost, higher-deductible plan in response to indications that price is the No. 1 factor that many shoppers base their decisions on. Oregon's state-based exchange was a complete debacle and the state will rely on HealthCare.gov for 2015 enrollments.
“We've got a ballgame in Oregon,” Bonder said. “It's going to get interesting.”
Nevada is another state that struggled with a dysfunctional exchange and is switching to the federal website for the next enrollment period. Thomas Zumtobel, CEO of Nevada Health Co-Op, said that less than a third of the expected 120,000 sign-ups materialized in the state. But the co-op was able to capture 37% of that business, a far greater share than anticipated.
Zumtobel said the co-op is keeping premiums largely flat in the southern part of the state, which includes Las Vegas, but is reducing rates by 30% in the northern part of the state. “We were out of whack in the north,” he said. “So we fixed that.”
Dr. Martin Hickey, CEO of co-op plan New Mexico Health Connections and chair of the national association for the plans, argued that co-ops will deliver a higher level of customer service than consumers are used to receiving from the large legacy insurers. The not-for-profit insurers will be able to compete more effectively as exchange shoppers become more sophisticated about their choices. And they will have to, Hickey said. “If you don't have numbers you don't have a business.”
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