Iowa's health co-op ready to take on challenges

In 2009, as the Obama Administration wrestled with how to remake health care coverage in America, it wanted to ensure plans would be broadly available - and affordable.

Health co-ops were a piece of that puzzle. Created under the Patient Protection and Affordable Care Act of 2010, health co-ops were designed to add competition into the marketplace and therefore bring down prices.

But as with the rollout of the Affordable Care Act itself - sometimes referred to as Obamacare -  not everything has gone smoothly for the co-ops.

Problems surrounding the not-for-profit health insurers are broad, ranging from a lack of education on the public's end to the co-ops' need to build a network of doctors.

And while some co-ops across the country are running into challenges, Cliff Gold, president of CoOportunity Health, Iowa and Nebraska's consumer-operated-and-oriented plan, said the company knows its limitations. That helped it take a realistic approach when it comes to succeeding in the marketplace.

"Starting an insurance company from scratch is not easy," he said.

In fact, after reviewing internal government reviews and a federal audit, the Washington Post reported in mid-October that out of the 23 approved co-ops, one has closed, another is struggling and nine more are projected to have financial problems.

Gold said the company planned around its potential problems and formed strategic partnerships, teaming up with HealthPartners and preferred provider organization Midlands Choice, to build the necessary infrastructure to offer plans.

“I think the biggest restriction is that we can't use federal money to market the program,” Gold said, referring to a portion of the law that prohibits co-ops use of federal loans in that regard. “So we went to Iowa Credit Union and got a $650,000 loan to use for an ad campaign,” he said.

That marketing campaign is important because many people are unfamiliar with what a health co-op is and how it's different from a traditional insurance carrier. As with agriculture, electric or phone co-operatives, consumer-operated-and -oriented plans are member owned.

Chipping away at market share

The idea of health co-ops came about in 2009 during debate over the Affordable Care Act as a compromise to a public health insurance option, said Pete Damiano, director of the University of Iowa's Public Policy Center.  The idea was that these new insurance options could create more competition at the state level, he said.

The co-ops were meant to be nationwide, and the law originally put aside $6 billion for the federal government to provide in loans to emerging co-ops. That number was later reduced to $3.4 billion in 2011, and was cut again to $2 billion in 2013 during federal talks relating to sequestration.

Because of the shrinking budget, there are only 23 co-ops across the country. The co-op that tried to launch in Vermont was unable to get licensed.

CoOportunity Health, headquartered in Des Moines, is the only one to offer coverage in multiple states.

Gold anticipates CoOportunity Health to have about 7,000 Iowa members at the end of the first year and 15,000 to 25,000 Iowa members by the end of its first three years.

“We don't have a grand design and don't expect to become the biggest carrier,” he said.

But Gold does believe the co-op could secure 5 percent of the market share, which could reshape the market in Iowa.

Issues could arise though, he said, if problems persist with Healthcare.gov, the national website whose technical problems are preventing many from easily signing up for plans. However, even with those website problems, CoOportunity announced its first member at the end of October.

The states that do have co-ops in the marketplace already are seeing some benefits. According to an October analysis released by the National Alliance of State Health Co-ops, the average premium in states with co-ops is 8.4 percent lower than state's without.

“We are disrupting and changing the market,” Gold said.

He believes that because Iowa is such a concentrated market, traditional carriers such as Wellmark Blue Cross Blue Shield and United Healthcare are not excited about new competition.

This is already forcing competitors to change the way they do business, Gold said, adding that traditional insurance companies are pushing for members to renew plans early or freezing rates to keep members from shopping on the exchange.

Offering a competitive product

Wellmark did offer to extend customers' plans through next year and also did not increase rates, but it was not in response to new competition, said David Brown, executive vice president, chief financial officer and treasurer for Wellmark, from his Des Moines office.

Instead, the company offered individual members and small groups the chance to extend their current plans and receive the same coverage through 2014. After that time, members will have to switch over to Affordable Care Act compliant plans, which require a higher level of minimum coverage, including maternity care, mental health care and preventative health management.

Rates stayed the same, Brown said, because medical and administrative fees stayed flat. The only base premium increase Wellmark members will receive is to accommodate new fees and taxes under the Affordable Care Act.

“It was not driven by a desire to keep customers,” he said. “It was driven by a trend in the market.”

But Brown didn't deny that the company's decision to wait until 2015 to join the exchange could give other insurers, including the co-op, an advantage.

“They have a chance to capture market share,” he said. “But going forward, when we join the exchange in 2015, (success) will come down to competition.”

Wellmark insures about 80 percent of the health insurance market in Iowa, the company said. About 80 percent of the company's small groups have chosen to keep their coverage with Wellmark.

“We want all Iowans to have insurance,” he said. “We're trying to create more options. We know that if we don't offer a competitive product, we can't keep our members.”