A.M. Best’s Briefing

New U.S. Health Co-ops Fight Through Financial Strains of Launch Phase

 Typical growing pains: High expenses, loses & claims exceeding net-premiums

OLDWICK, N.J., August 11, 2014—Many of the Consumer Operated and Oriented Plans (Co-ops) established under The Patient Protection and Affordable Care Act (ACA) are experiencing growing pains typical of start-ups, including high expenses, underwriting losses and, in some cases, claims exceeding net premiums, according to a Best’s Briefing.

The Co-ops Program provides a means for nonprofit health insurers to compete with other insurance carriers in the new exchange market under the ACA. The program entails the issuance of low-interest loans by the Centers for Medicare & Medicaid Services (CMS) to eligible nonprofit insurers for start-up and operating costs. CMS awarded funding to 24 Co-ops to commence operations. One Co-op, in Vermont, was denied a license to sell health insurance as it failed to meet the state’s standards. Some are offering individual and small-group products in the non-exchange market (known as off exchanges) as well.

Early results for the Co-ops indicate very modest enrollment, and nearly all participants reported operational losses through the three months that ended March 31, 2014

The briefing, titled “New U.S. Health Co-ops Fight Through Financial Strains of Launch Phase,” states that A.M. Best collected data from all but one of the Co-ops for the first quarter of 2014. Early results for the Co-ops indicate very modest enrollment, and nearly all participants reported operational losses through the three months that ended March 31, 2014. The aggregate underwriting results of these Co-ops through the first quarter of 2014 were a loss of $72.5 million, and at approximately one-third of the insurers, the medical loss ratios exceeded 100.

For the full, complimentary copy of this briefing, please visit here.

 

 

 

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.