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Inside the plan by health co-ops to survive

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The health insurance co-ops created under the Affordable Care Act are have seen better days — much better days, in fact, as nine have either closed or plan to by the end of this calendar year. 

Co-ops are nonprofit insurers owned by their policyholders, who are generally individuals and small employer groups.

 

And the trade group that represents these new insurance plans, which are owned by policyholders, said the remaining 14 all are “financially fragile.”

Courtesy McKinsey & Co.

But no matter how bleak, Kelly Crowe, of the National Alliance of State Health Co-Ops, said she doesn’t plan on attending any more co-op funerals.

“We’re not sitting around hoping that something happens,” she said. “We are very actively trying to make something happen.”

In the health care world, a lot of people see these insurers as an ill-conceived $2 billion sweetener thrown into Obamacare. And while few have shed tears for the co-ops that are folding, proposed megamergers in the industry have breathed a bit of life into the co-ops, Crowe said.

States that have co-ops have lower premium rates than states that don’t have coops. We are talking about 6, 8, 9 percent,” she said.

The threat of higher prices and lower-value care has raised questions on Capitol Hill about how easy it is to enter the market. University of Minnesota economist Stephen Parente said it’s tough.

“I’ve done research on this for about 15 years, and look at the different … startup health insurers. Very few of them have survived,” he said.

One question for the Obama administration is how much it’s willing to do to keep co-ops going. The co-ops said pushing out the due date on a five-year loan and changes that make it more attractive for private dollars to invest could be enough to keep the lights on. Given the potential that these firms could design more innovative insurance plans, and perhaps control costs, Parente sees some value.

Courtesy McKinsey & Co.

“If the regulations are lifted a bit so that things could compete more actively, and they could get access to capital in a way that would allow them to go forward, that would be beneficial to see what they are able to do,” he said.

Parente said if the co-ops manage get a little more breathing room but continue to struggle, then it’s time for them to leave the stage.

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