Health insurance co-ops were the last vaguely plausible door prize for progressives and others who wanted a robust public option tied to either Medicare rates or at least open negoatiation by CMS with providers. Co-ops were sacrificed at the alter of austerity in the budget showdowns as the federal start up funds and loan guarantees got whacked. And honestly, I’m of the opinion that the tax structure of an insurer has some but not too significant influence on quality. There are some great local non-profit insurers, and some shit-tastic local non-profits; there are some great national for profits as well as great national non-profits as well as bottom feeding scumbags that make the industry slightly less popular than Congress. More important, in my mind has always been the structure and integration of an insurer with providers.
However, the co-ops seem to be proving me wrong in the first year. This is a nice little surprise.
Bangor Daily News on March 16 reported on the Maine co-op: (BTW — Bangor Daily News does excellent healthcare reporting in general)
In Maine, the insurer that has enrolled the most Affordable Care Act customers isn’t the state’s well-established Blue Cross Blue Shield plan, owned by WellPoint Inc. It’s WellPoint’s only rival: Maine Community Health Options, a startup that didn’t exist three years ago.
The newcomer, funded primarily by taxpayer money lent under the U.S. health care law, has won about 80 percent of the market so far in Maine’s new insurance exchange…
Along with Maine, co-ops have attained large market share in New York, Iowa, Nebraska, Colorado, Kentucky, Wisconsin, South Carolina, Utah, Montana, Nevada and New Mexico, said John Morrison, a board member and founding president of the co-op trade group, and other executives.
New York’s co-op, Republic Insurance of New York, which was founded by the same organization, Freelancers Union, that started Bonder’s company in Oregon, is probably the largest in the country, with more than 50,000 members….
Federal authorities have approved plans by the co-ops in Montana, Massachusetts and Kentucky to expand into neighboring states next year — Idaho, New Hampshire and West Virginia, respectively.
This is some great news. I think the co-ops that are succeeding are succeeding because they are new entrants to the market and can craft their strategies to fit the market as it is without worrying about creating problems for other business divisions. Co-ops that only sell Exchange qualified products to individuals and small groups don’t have to worry about pissing off their providers who also serve their large group and Medicare Advantage populations as the co-ops don’t have large groups or Medicare Advantage to worry about. They are able to craft narrowly tailored strategies that fit the needs of the people who are shopping on Exchanges.
Incumbent insurers who offer a broad array of products to multiple market segments (individual, Exchange, small, medium, large group, Medicare Advantage, Medicaid managed care, CHIP etc) don’t have the luxury of narrowly crafting a strategy for a small but growing market segment in isolation. Exchange decisions will be influenced by the need to keep large group markets happy. For instance, an Exchange decision to offer Medicare plus 1% pricing for Exchange may not fly as the providers have the leverage of withdrawing not just from Exchange but from the commercial large group markets where they were getting Medicare plus 30%. Or the decision to require referrals from an Exchange HMO but not a large group EPO will provoke provider resistance as their job just got more complicated for only a small population.
I think the most important line from the report above is the expansion of three co-ops into West Virginia, New Hampshire and Idaho. Idaho has an insurance market in 2014 that had multiple companies offering Exchange plans. West Virginia and New Hampshire were single company states on the Exchange in 2014. That means the sole insurer was mainly competing against itself and the state regulator’s ability to limit “outrageous”. Co-ops are a viable competitor that will at the very least keep the big boys more honest. And given the Maine experience, they could overrun the market. I have doubts about that as the big insurance carriers will have a year of name recognition and the rules of the 2015 open enrollment period default people into sticking with what they bought in 2014, but competition is a good thing.