Risky Business

Shortly after the Affordable Care Act's arrival on the scene, I began to hear rumblings of various groups wanting to enter health insurance markets, in particular the insurance cooperative market fostered by the Act. Cooperatives are designed to launch new products to enhance competition in the exchanges. Consumer board governed, they attracted many  in the not for profit world.   My first face-to-face meeting with an interested party was sobering.  They, in fact, either seemed or wanted to seem pretty ignorant of the state solvency requirements, for example, such an entity might face. I was concerned.

When I learned recently that 22 of the 23 extant coops lost money last year, I can't say I was surprised. Entry into health insurance markets is notoriously difficult.  Although start-up funding from the government can be useful, building enrollment in an industry with powerful brands is a challenging time consuming project.  Oh, and did I mention that entry into highly concentrated markets may leave very little room in which to play the maverick market entrant? And the reinsurance payments, though generous at the start, are going away.

The brightest star of all is Maine's Community Health Options, which has achieved a surplus while insuring some 71,000 covered lives in Maine and New Hampshire.  Interestingly, size matters but a proprietary network of providers may matter more. The largest Coop, Health Republic Insurance in New York, is losing money, after all.

It is pretty clear that, to continue to pursue this experiment, more and longer term subsidy will be required.  In a country with a rapidly consolidating health insurance sector, it will be interesting to see how interested we are in attempts to foster market entrants.

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