Did the Colorado’s health insurance co-op sacrifice financial solvency for public relations wins? That’s the question we’re left after reviewing a report on state health co-ops issued by the Office of the Inspector General, which oversees the Department of Health and Human Services.
Colorado’s nonprofit co-op is called the Colorado Health-OP, which covers 80,000 people and provides just over 40 percent of all policies issued through the state health insurance exchange, according to The Statesman. Across the country, the co-ops formed through Obamacare are underwater. One in Louisiana shut its doors as did one that served Iowa and Nebraska recently. Colorado’s co-op is similarly troubled.
The audit showed that Colorado’s co-op had a whopping $23 million loss in 2014, which resulted from $54 million in income from premiums plus $14 million in other income (wait, what other income?), but $73 million in claims expenses and $18 million in administrative expenses.
Oddly, the co-op achieved its enrollment numbers (and then some), yet still posted a loss. The audit explained it as such:
“Claims’ expense exceeding premium income can be attributed to higher-than estimated enrollment of members with more expensive health conditions, enrolling fewer-than-expected young and healthy members, or inaccurate pricing of health insurance premiums.”
While the federal audit failed to identify which co-ops were engaging in behavior leading to insolvency, it wouldn’t take a rocket scientist to know that the very things identified as problematic were taking place in Colorado:
“Some CO-OPs updated their business plans to include strategies to address low enrollment. For example, one CO-OP said it intended to lower its health insurance rates and focus on selling to individuals and small groups outside of the marketplace to increase enrollment for the remainder of 2014. Another CO-OP said it planned to focus on different educational and outreach activities, such as developing flyers, posters, and social media platforms to support brand awareness and educate consumers. Between June 30, 2014, and December 31, 2014, enrollment increased at these two CO-OPs. However, net losses also increased.”
In an effort to make its numbers, did Colorado’s health co-op reduce its rates so low that they were unsustainable?
The future for the Colorado co-op does looks similarly ominous. The projected 2014 net income for the co-op was supposed to be a loss of just? $5.6 million. The loss came in at $23 million. The loss for 2015 is projected to be $2.9 million. In 2016, the co-op is projected to net $1.9 million, but, of course, if the losses remain on the same track as 2014, we might expect bigger losses for 2015 and a loss for 2016.