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Health Insurance Cooperative (Health CO-OP)

Last Updated 6/02/16

Issue
Some of the health insurance Consumer Oriented and Operated Plans (CO-OPs), created under the auspices of the Affordable Care Act (ACA), are struggling. The ACA created health CO-OPs to help create new, private non-profit health issuers set up through the Exchanges. The goal of the CO-OPs is to provide affordable health insurance to their members and increase competition and choice in the marketplace. CO-OPs must be licensed as issuers in each state in which they operate and are subject to state laws and regulations that apply to all similarly situated issuers.

As of May 2016, 13 health CO-OPs that opened at the start of 2014 are closing. The closures will be in Arizona, Colorado, Iowa, Kentucky, Louisiana, Michigan, Nevada, New York, Ohio, Oregon, South Carolina, Tennessee, and Utah. In addition to those already ceasing to write policies, several other state CO-OPs are being closely monitored by regulators. State insurance regulators have been proactive to avoid serious coverage disruptions from the unsuccessful CO-OPs. Almost all the customers affected were able to keep their plans through the end of 2015 and find new coverage though the exchange or in the individual market for 2016

There is no single reason the CO-OPs have been unsuccessful. However, one factor is that CO-OPs were new companies taking on unknown risk pools and operating in a very competitive marketplace. Other factors include; risk corridor payments were far less than expected; the enrollment was higher or lower than expected in some states; and some CO-OPs had to rend administrative services.

State insurance regulators have formed a CO-OP Solvency & Receivership (B) Subgroup to provide a forum for state regulators to discuss and share information on the status of the CO-OPs created under the ACA. The Subgroup meets in regulator-to-regulator sessions pursuant to the NAIC Open Meetings Policy #3, because it is a discussion of specific companies or entities.

Overview of ACA Creation of CO-OPs
Section 1322 of the Affordable Care Act legislation implements the Consumer Operated and Oriented Plan system. CO-OPs were originally proposed as an alternative when the original public plan option was discarded during the health care reform debate back in 2009.
Section 1322(c) of the Affordable Care Act defines a "qualified nonprofit health insurance issuer" as one:

  • Organized under State law as a nonprofit member corporation,
  • All CO-OP activities of which consist of the issuance of qualified health plans in the individual and small group markets, and
  • Meet other requirements of section 1322(c).

CO-OP "qualified nonprofit issuers must, as directed by the new law, operate with a strong consumer focus and use any profits to lower premiums, improve benefits, or improve the quality of health care delivered to plan members."