Colorado health co-op calls it quits
October 26, 2015
The region's lowest-cost health insurance carrier has breathed its last gasp.
Colorado HealthOP did not receive more than $14 million in federal funding it says it had been promised, and is being forced into insolvency by federal and state agencies. HealthOP is the seventh state co-op to collapse across the nation.
That leaves more than 7,000 policyholders in Eagle, Garfield, Pitkin and Summit counties – and 83,000 across Colorado – with new insurance to buy before the end of the year.
As long as clients pay their premiums, their claims will also be paid, said HealthOP CEO Julia Hutchins.
The co-op accounted for 40 percent of the health insurance sold on Colorado's state health exchange. Division of Insurance Commissioner Marguerite Salazar announced Friday that Colorado HealthOP could no longer sell policies through the state exchange, saying the co-op missed cash-reserve requirements just before the open enrollment period begins Nov. 1.
Not true, HealthOP says.
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Although Colorado HealthOP stood to collect $10 million less than what was owed in federal funds, the co-op's independently certified actuarial projections indicate the company would be profitable in 2016, shore up its cash reserves and begin repaying its federal start-up loans early, Hutchins said.
"We are astonished and disappointed by the Colorado Division of Insurance's decision. It is both irresponsible and premature," Hutchins said in a written statement.
Colorado HealthOP's nonprofit business model has enhanced competition and driven down prices in Colorado, Hutchins said.
"By choosing this course of action, the Division has let local and national politics hurt Coloradans' access to low-cost healthcare options and assessed Colorado taxpayers with significant avoidable costs. For this reason, Colorado HealthOP will continue its fight, pursuing all possible remedies, to serve Colorado."
Colorado HealthOP is a nonprofit health insurance co-op founded in 2012. It's the latest in a series of co-op shut downs across the country, for many of the same reasons, Hutchins said.
How it was supposed to work
The program was created to keep insurers from trolling new marketplaces and plucking out healthy, profitable customers who don't need much medical care. It was also supposed to help keep premiums affordable by spreading the cost of very large insurance claims across all coverage providers.
Insurance companies with healthier consumers in a state are supposed to pay charges that help offset some of the costs of those insurance companies with sicker consumers in that state.
The program was not originally required to pay for itself, but the Congressional Budget Office reported earlier this year that Obamacare will cost $1 trillion more than expected, said Rep. Scott Tipton. A federal funding bill banned Health and Human Services from using any other resources for the program, and that it be "budget neutral."
"We were told it was supposed to provide health care that's more affordable and accessible. It's neither, especially in rural areas," Tipton said.
On Oct. 1, health insurers learned they would be reimbursed only 12.6 percent of the money they were owed, nearly $2.9 billion for coverage they provided in 2014. The government said it would pay them $362 million.
Colorado HealthOP is owed $16.2 million. It would receive about $2 million, the feds said.
Bethe Wright runs The Wright Insurance Company in Eagle County and is a big HealthOP fan. When she learned there was a member-driven co-op, she called them right away, and has been working with them since they launched in 2012.
"I almost feel like there has been a death in the family," Wright said. "They're a great group of people on a great mission, to be in charge of what we want as consumers, instead of insurance companies telling us what we can have. They actually listened and did something abut it. It was a member-driven company."
What does that mean?
In our four-county region, you'll most likely pay more for the same coverage than you would on the Front Range.
For example, a policy with Anthem Blue Cross will cost you 26 percent more in the mountains as clients on the Front Range pay for the same coverage, Wright said.
That gap is smaller than it used to be. That same policy used to cost you 50 percent more in the mountains, Wright said.
As for HealthOP, a 40-year old person in Summit County with a Bronze Level plan in Colorado HealthOP's more narrow network pays $208 per month. The same plan in a statewide network costs $327 per month.
For now and for practical purposes, that leaves Kaiser, Cigna, Rocky Mountain Health Plan and Anthem Blue Cross providing plans in the mountain region.
Almost all health insurance carriers serving Colorado had requested rate increases for next year. Some of their increased rates were posted recently, just hours after Colorado HealthOP emerged from a two-hour closed-door session with the Division of Insurance and announced it would begin shutting down.
What this could cost
Nearly 40 percent of Coloradans who purchased insurance through Connect for Health Colorado in 2015 are Colorado HealthOP members; these Coloradans will be forced out of the coverage they chose and likely into a choice between more expensive coverage or no health insurance at all.
The co-op's wind-down will cost taxpayers an estimated $40 million. The premature closure of Colorado HealthOP will cause the co-op to default on $72 million in federal start-up and solvency funding, loans that Colorado HealthOP said it could pay back early if allowed to continue to operate.
Staff Writer Randy Wyrick can be reached at 970-748-2935 or firstname.lastname@example.org.
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