Best’s Briefing: New U.S. Health Co-ops Fight Through Financial Strains of Launch Phase

OLDWICK, N.J.--()--Many of the Consumer Operated and Oriented Plans (Co-ops) established under The Patient Protection and Affordable Care Act (ACA) are experiencing growing pains typical of start-ups, including high expenses, underwriting losses and, in some cases, claims exceeding net premiums, according to a Best’s Briefing.

The Co-ops Program provides a means for nonprofit health insurers to compete with other insurance carriers in the new exchange market under the ACA. The program entails the issuance of low-interest loans by the Centers for Medicare & Medicaid Services (CMS) to eligible nonprofit insurers for start-up and operating costs. CMS awarded funding to 24 Co-ops to commence operations. One Co-op, in Vermont, was denied a license to sell health insurance as it failed to meet the state’s standards. Some are offering individual and small-group products in the non-exchange market (known as off exchanges) as well.

The briefing, titled “New U.S. Health Co-ops Fight Through Financial Strains of Launch Phase,” states that A.M. Best collected data from all but one of the Co-ops for the first quarter of 2014. Early results for the Co-ops indicate very modest enrollment, and nearly all participants reported operational losses through the three months that ended March 31, 2014. The aggregate underwriting results of these Co-ops through the first quarter of 2014 were a loss of $72.5 million, and at approximately one-third of the insurers, the medical loss ratios exceeded 100.

For the full, complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=227627 .

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Company
Wayne Kaminski, 908-439-2200, ext. 5061
Senior Financial Analyst
wayne.kaminski@ambest.com
or
Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
sally.rosen@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

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Contacts

A.M. Best Company
Wayne Kaminski, 908-439-2200, ext. 5061
Senior Financial Analyst
wayne.kaminski@ambest.com
or
Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
sally.rosen@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com