CO-OPs are doing well, even if they are disappearing

Performance and CMS oversight of the nonprofit health insurance issuers known as consumer operated and oriented plans (CO-OPs) has improved over time, despite the fact that the number of CO-OPs is shrinking. Additionally, according to a GAO report on oversight, premiums, and enrollment in CO-OPs, the issuers are averaging lower premiums for 2015 than they were in 2014 and generally have lower premiums than competing issuers. The GAO also found that combined enrollment for the 22 CO-OPs that offered plans in 2015 was more than double the enrollment of the prior year.

CO-OPs. The Patient Protection and Affordable Care Act (ACA) established CO-OPs through a loan program designed to develop consumer-governed, nonprofit health insurance issuers that would offer qualified health plans (QHPs) to individuals and small employers, in an attempt to enhance competition in states’ insurance markets and drive down premiums. HHS disbursed $2.4 billion in loans to establish 23 CO-OPs that started offering plans in 2014. Due to concerns about the sustainability of the program, the GAO examined how (1) CMS monitors CO-OP performance and sustainability, (2) CO-OP plans and premiums changed between 2014 and 2015, and (3) enrollment in CO-OP health plans changed from 2014 to 2015. Since the program’s inception, the number of participating CO-OPs has fallen. In 2016, only 11 CO-OPs continued to offer health plans on the exchanges of 13 states.

CMS monitoring. Initially, CMS monitored CO-OPs through routine teleconferencing and standard reporting requirements imposed on CO-OPs. CMS also initially required issuers to take part in an improvement plan if the issuer demonstrated a significant risk to a recipient’s viability or a pattern of noncompliance with program requirements. CMS subsequently expanded its monitoring to include additional direct analysis tools to analyze enrollment, net income, premium revenues, claims and administrative expenses, and financial information related to risk mitigation programs and reserves on a quarterly basis. The agency also developed a risk assessment tool, which is used on a quarterly basis to assess: long-term sustainability, working capital, profitability, compliance with state requirements, compliance with CO-OP requirements, management, and infrastructure issues. CMS also has an escalation plan to identify high risk CO-OPs based upon a targeted question set.

Premiums. In 2015, in the 20 states where CO-OPs were operating, CO-OP premiums were generally lower than CO-OPs’ 2014 premiums and were lower than other issuers’ 2015 premiums. State-wide average premiums for silver plans offered by CO-OPs decreased as much as $180.44 per month in Arizona; in the states where CO-OP premiums increased, the increases were not more than $20 per month.

Enrollment. Over 1 million individuals enrolled in a plan offered by the 22 CO-OPs that participated in 2015, almost double the figure from 2014. The 22 CO-OPs gained 610,420 net new members, with all but one CO-OP increasing enrollment. However, three of the CO-OPs with the largest enrollment are among the CO-OPs that are no longer operating.

SOURCE: GAO Report, No. GAO-16-326, March 17, 2016.

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