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Kentucky CO-OP's demise not likely to be the last

Experts say several factors to blame for string of startup plans closures

When news broke that Kentucky Health Cooperative will stop selling policies at the end of the year, it was yet another sign that the prognosis for consumer-operated and -oriented health plans (CO-OPs) isn't encouraging.

The Kentucky CO-OP's announcement was just the latest in a string of closings among the state-based insurance startups created by the Affordable Care Act. Among the casualties are the Health Republic of New York, the Louisiana Health Cooperative, Iowa's CoOportunity Health and the Nevada Health CO-OP.

And it isn't likely to be the last to fail, experts tell the Washington Examiner. "They might be able to live on for another year, but they can't expand," says Tom Miller, a resident fellow at the American Enterprise Institute, a center-right think tank. "Almost all of them are looking pretty negatively without any upside."

In fact, an Office of the Inspector General report in July found that 21 out of the 23 CO-OPs then in operation incurred net losses in 2014. Most also struggled to meet enrollment goals and were beset by technical problems.

One reason for the CO-OPs' struggles is that they operate in only one market--the ACA exchanges, Chris Sloan, a manager at health research firm Avalere Health, tells the publication. That makes the risks inherent in entering the insurance markets even riskier.

The Kentucky Health Cooperative also blames the shortfall in the federal risk corridor program payouts for its decision to close, as it was counting on that funding to stay afloat. Sloan tells the Examiner that he expects that CO-OPs may be hit hardest by this shortfall. And Miller thinks it may force CO-OPs to raise premiums, which in turn will drive away customers.

It's not all bad news for CO-OPs, though: Maine Community Health Options has been one of the rare success stories, in part by surpassing its first-year enrollment goals.

To learn more:
- read the article

Related Articles:
Another CO-OP shuts down: Kentucky Health Cooperative won't offer plans in 2016
OIG report finds CO-OPs underperformed, didn't reach enrollment goals
More CO-OP woes: Health Republic Insurance of New York to stop selling coverage
Execs well-paid even as CO-OPs struggle
Some insurers will take hit from risk corridor program shortfall