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Big insurers fear that CO-OPs have unfair competitive advantage in market

Federal funding allows for lower CO-OP premiums, traditional insurers say
December 9, 2014 | By
Tools

Dominant insurers worry that consumer operated and oriented plans (CO-OPs) have an unfair advantage over their competition in healthcare markets because they receive millions in federal funding to operate their business, reported Kaiser Health News.

To boost membership in their second year of operation, at least six CO-OPs have significantly dropped 2015 premiums. Some, such as HealthyCT, lowered premiums by an average of 8.5 percent, while other CO-OPs, such as Land of Lincoln Health in Illinois, cut rates by an average of 20 percent to 30 percent.

Some larger, traditional insurers say the CO-OPs have an unfair advantage. "It's unfortunate, because this is going to be very disruptive to the market," Idaho Blue Cross CEO Zelda Geyer-Sylvia said about Montana Health CO-OP, which started selling plans into Idaho this year while lowering its premiums.

Geyer-Sylvia argues that Montana Health CO-OP's low rates are "unsustainable," since it won't amass enough premium revenue to pay claims in the long run. Meanwhile, their lower prices will likely draw consumers away from the bigger insurers.

However, Jan VanRiper, chief executive of the trade group National Alliance of State Health CO-OPs, disagrees that CO-OPs have an unfair advantage, noting that they have to pay back their loans in five years. "Lower prices for consumers are very good news," she told KHN.

Meanwhile, Wellmark in Iowa is allegedly intimidating CoOportunity Health by threatening to fire a prominent insurance agent if he serves on the CO-OP's board. CoOportunity Health filed a complaint with the state insurance department, saying Wellmark is "brazenly violating" state laws against anti-competitive behavior, the Des Moines Register reported.

To learn more:
- read the Kaiser Health News article
- see the Des Moines Register article

Related Articles:
Colorado CO-OP shows how nonprofit insurers are disrupting markets
Start up, CO-OP insurers are expanding into new markets
Can insurers gain market share by cutting premium rates?
CO-OPs attain lopsided success

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