CO-OP health plans: patients’ interests first

Three CO-OPs continue to operate in five states, covering roughly 140,000 people

Author: Louise Norris | Date Posted: December 5, 2023

Co-op health plans under the ACA.

Key takeaways

Only three CO-OPs are operational as of 2024

When the first ACA open enrollment period got underway in the fall of 2013, there were 23 Consumer Operated and Oriented Plans (CO-OPs). But within a few years, just four CO-OPs were still operational, offering health insurance plans in five states. That was the case from 2018 through 2020, but one of the four remaining CO-OPs, — New Mexico Health Connections — closed at the end of 2020, leaving only three CO-OPs operational as of 2021. However, Mountain Health CO-OP expanded into Wyoming for 2021, and is now offering coverage in three states.

Here’s how the CO-OP landscape looks for 2024 coverage:

For 2024 individual market plans, the CO-OPs mostly increased premiums or decreased them only slightly:

(For perspective, nationwide average premiums increased by about 6% for 2024 across all individual market plans 4 — the vast majority of which are not CO-OPs.)

How many people are enrolled in CO-OP plans?

In 2023, there were roughly 140,000 people enrolled in three CO-OPs across five states. That’s down from more than a million enrollees in 2015, when the CO-OPs were at their peak and most were still operational. But it’s slightly higher than CO-OP enrollment was in 2019/2020, when there were still four operational CO-OP. Here’s a summary of approximate CO-OP enrollment, including individual and group coverage:

What are CO-OPs and how are they different?

CO-OPs were created under a provision of the Affordable Care Act (aka Obamacare). The idea for CO-OPs was proposed by Senator Kent Conrad (D-ND) when the original public plan option was jettisoned during the health care reform debate. Lawmakers added the CO-OP provision to the Affordable Care Act to placate Democrats who had pushed for a government-run, Medicare-for-all type of health insurance program.

At the time, progressives who preferred a public option derided CO-OPs as a poor alternative because they can’t utilize the efficiencies of scale that would come with Medicare For All, nor do they have the market clout that a single payer system would have when negotiating reimbursement rates with providers.

But supporters noted that because CO-OPs are neither government agencies nor commercial insurers, they could put patients first, without having to focus on investors or Congressional politics.

Instead of paying shareholders, CO-OP profits are reinvested in the plan to lower premiums or improve benefits (since most of the CO-OPs were not financially sustainable and ended up closing, profits were few and far between). And customers’ health insurance needs and concerns become a top priority because the CO-OP’s customers/members elect their own board of directors. A majority of these directors must themselves be members of the CO-OP.

CO-OPs are private, nonprofit, state-licensed health insurance carriers. Their plans can be sold both inside and outside the health insurance exchanges, depending on the state, and can offer individual, small group, and large group plans. But they’re limited to having no more than a third of their policies in the large group market (a more lucrative market than individual or small group). Most of the CO-OPs’ membership has been concentrated in the individual market, and that’s still the case for the three CO-OPs that continue to be operational.

New Mexico Health Connections was an exception, as they had more enrollees in their employer-sponsored plans (including large group plans) than in their individual market plans. But New Mexico Health Connections sold their employer-sponsored plans to a new for-profit entity in 2018, leaving the CO-OP with just the individual market segment. New Mexico Health Connections closed altogether at the end of 2020; its 14,000 individual market enrollees had to select plans from other insurers for 2021.

Lawmakers had originally planned to provide $10 billion in grants to get the CO-OPs up and running in every state. But insurance industry lobbyists and fiscal conservatives in Congress succeeded in reducing the total to $6 billion, and turning it into loans — with relatively short repayment schedules — instead of grants (and CO-OPs were not permitted to use federal loan money for marketing purposes). Then, during budget negotiations in 2011, those loans were cut by another $2.2 billion. And in 2012, during the fiscal cliff negotiations, CO-OP funding was reduced even further — and applications from 40 prospective CO-OPs were rejected

Ultimately, the Centers for Medicare and Medicaid (CMS) awarded about $2.4 billion in loans to 23 CO-OPs across the country (there were 24 CO-OPs, but Vermont Health CO-OP never became operational. CMS retracted their loan in September 2013 — before the exchanges opened for the first open enrollment — because there were doubts that the program could be viable with Vermont’s impending switch to single-payer healthcare in 2017; ironically, Vermont pulled the plug on their single-payer vision in late 2014).

The CO-OP failures were due in large part to a combination of premiums that were too low, benefits that were too generous, enrollees who were sicker than anticipated, competition from bigger carriers with larger reserves, the risk corridor shortfall that was announced in the fall of 2015, and the risk adjustment payment announcements that were made in June 2016 (see below for a timeline of the closures).

The expansion of short-term plans and association health plans — and efforts to repeal the ACA (including the repeal of the individual mandate penalty after the end of 2018), further increased uncertainty for insurers, making the situation even more precarious for small insurers like the remaining CO-OPs.

But despite those issues, the three remaining CO-OPs continue to operate successfully, and do seem to have carved a sustainable niche.

Focus on cost savings and reinvested profits

How do CO-OPs increase cost efficiencies?

Where are CO-OPs still selling plans in 2021?

There are three CO-OPs that are offering plans in five states in 2021. Although the vast majority of the original CO-OPs have failed, these three have shown signs of overall stability, including rate decreases for some plans in 2019, 2020, and/or 2021.

Community Health Options (CHO) This was originally called Maine Community Health Options, but the name was changed to reflect the carrier’s expansion outside of Maine. 44,000 people enrolled in coverage through the exchange in 2014, and 83 percent of them selected Community Health Options, making the CO-OP’s first year an amazing success.

CHO expanded into New Hampshire for 2015, fueled by the initial success in 2014 and by a new loan from CMS. During the second open enrollment period, CHO once again dominated the Maine market, securing about 80 percent of the exchange market share. They also enrolled about 5,000 people in New Hampshire. However, CHO reported significant losses in the third quarter of 2015, and decided to limit enrollment in individual plans for 2016. Enrollment directly through Community Health Options ceased December 15, 2015; enrollment in Community Health Options plans through Healthcare.gov ceased December 26.

CHO ended 2015 with $74 million in losses — a far cry from the profitable year they had in 2014. In early 2016, Maine’s Insurance Superintendent proposed putting the CO-OP in receivership and canceling a portion of its plans (about 20,000 members would have been transitioned to other coverage). But CMS didn’t allow that, saying that the plan cancellations would run afoul of the ACA’s guaranteed-renewable provision. Instead, the CO-OP is under increased oversight from the Maine Bureau of Insurance, which puts out monthly reports that detail how the CO-OP is faring relative to its business plan.

CHO is the only remaining CO-OP that received money—as opposed to having to pay out money—under the risk adjustment program for 2015 and again for 2016. For 2017, Community Health Options had an average rate increase of 25.5 percent in Maine, where the bulk of their members lived. They exited New Hampshire entirely at the end of 2016, and reverted to operating solely in Maine, as they did in 2014. They implemented an average rate increase of 15.8 percent for 2018 in the individual market. For 2019, and again for 2020, however, CHO increased average premiums by less than 1 percent each year.

CHO’s total membership was 67,539 at the end of 2016, and had dropped to 44,015 by the first quarter of 2017 (all in Maine, since they’re no longer offering plans in New Hampshire). By September 2018, the CO-OP’s membership stood at 51,583, but it had dropped again, to 37,135, by late 2019 (about three-quarters were in the individual market, the rest were in the group market — mostly small group, but some large group as well).

By 2023, CHO membership stood at about 31,000 enrollees, in the individual and small group market. 5 CHO also had about 2,400 enrollees in the large group market in 2020, 6 and continues to offer large group plans. 7 From the end of 2021 to late 2022, total CHO enrollment grew by 28%. 13

The Maine Bureau of Insurance posted regular financial analyses of CHO for several years, but those updates seem to have stopped at the end of 2022. 14

Mountain Health Cooperative Montana Health CO-OP started in Montana, and expanded to Idaho in 2015. Then-CEO Jerry Dworak noted in 2015 that the CO-OP didn’t expand too quickly, and maintained substantial reserves; they were not relying as heavily as other CO-OPs on risk corridor payments to shore up their financial position.

Average rates for Mountain Health CO-OP in Idaho increased by 26% for 2016. For 2017, Mountain Health CO-OP’s average rate increase was 29% in Idaho, and 31% in Montana. As of December 22, 2016, the CO-OP ceased enrollments in Montana due to the “large number of new members for 2017.” The enrollment freeze was lifted in July 2017 for off-exchange enrollments; on-exchange enrollments in Montana were expected to become available in the summer of 2017 as well. In both cases, this was ahead of schedule, as the CO-OP had originally expected the lift the enrollment freeze as of November 1, at the start of open enrollment.

In another indication of the CO-OP’s increasing viability, their average proposed rate increase for 2018 was only 4% in Montana, demonstrating that the 31% average rate increase for 2017 may have been enough to stabilize the CO-OP and “right-size” the premiums. Ultimately, the average rate increase for 2018 ended up being considerably higher, at 16.6 percent, due to the elimination of federal funding for cost-sharing reductions (CSR).

For 2019, the CO-OP implemented an average rate increase of 10.3% in Montana and 7% in Idaho. And for 2020, their average rates decreased by nearly 12% in Montana, and increased by 6% in Idaho. Rates in both years would have been lower if not for the expansion of short-term plans and the elimination of the individual mandate penalty after the end of 2018.

The CO-OP’s board of directors announced in June 2018 that Richard Miltenberger would serve as the new CEO of Mountain Health CO-OP. In 2018, the CO-OP had about 25,000 members in Montana, and 24,000 in Idaho. In Montana, the CO-OP had more individual market enrollees than either of the other two insurers that offer plans in the state.

For 2021, the CO-OP raised rates only slightly in both Montana and Idaho, and also expanded into neighboring Wyoming, which had only had one individual market insurer since 2016. The CO-OP continues to offer coverage in all three states as of 2024.

After losing money from 2014 through 2017, Common Ground Healthcare posted a positive net income of $2.7 million in the first quarter of 2017.

For 2018, Common Ground’s average rate increase was 63%. But it would only have been about 20% without the elimination of federal funding for cost-sharing reductions. The rate increase for 2018 applied to about 29,000 members who had coverage in the individual market.

But for 2019, the CO-OP’s average premiums decreased by almost 19%. For 2020, they decreased again, by about 9%, and for 2021 and 2022, they decreased again, by roughly 6% each year. Statewide average premiums decreased each year from 2019 through 2022 in Wisconsin, due in large part to the reinsurance program that the state implemented. But Common Ground’s average rate decreases were generally larger than the statewide average.

2015 risk adjustment: 9 of 10 CO-OPs owed payments

Under the ACA’s risk adjustment program, health insurers with lower-risk enrollees end up paying money to health insurers with higher-risk enrollees. The idea is to prevent insurers from designing plans that appeal only to healthy enrollees, and to ensure that premiums reflect benefit levels, rather than the overall health of a plan’s enrollees. But CO-OPs found themselves disproportionately having to pay into the risk adjustment program, which hampered their financial progress and resulted in several having to close their doors.

On June 30, 2016, HHS released data on risk adjustment numbers for 2015. Of the 10 CO-OPs that were still operational at that point, nine had to pay into the risk adjustment program for 2015; only one remaining CO-OP – Community Health Options (operating in Maine and New Hampshire at that point) – received a risk adjustment payment. Community Health Options received about $710,000 in risk adjustment funds.

Some of the remaining CO-OPs had begun to be profitable in early 2016 (details below), but their financial situations now had to be considered in conjunction with the fact that the CO-OPs had to pay out the following amounts in risk adjustment payments, making their financial futures even more uncertain (of the nine CO-OPs that owed money in 2016 for the risk adjustment program, six have closed or are facing impending closure; only the CO-OPs listed in bold continue to be fully operational)

HHS implemented changes to the risk adjustment program for 2018, to make it more equitable and less burdensome for new, smaller carriers. But risk adjustment has remained a contentious issue. New Mexico Health Connections sued the federal government over the risk adjustment formula, arguing that it disadvantaged smaller, newer insurers (like the CO-OP) and favored larger, more established insurers. A judge agreed with the CO-OP, and ruled that the federal government needed to justify its risk adjustment formula for 2014-2018.

The Trump Administration responded by announcing in July 2018 that all risk adjustment payments and collections, nationwide, would cease for the time being, which caused widespread uncertainty and concern among health insurers and state regulators. But in late July, CMS announced that they would resume payments under the risk adjustment program, and insurers due to receive a total of $5.2 billion in risk adjustment payments for 2017 will receive that money in the timely fashion in the fall of 2018.

2016 risk adjustment: 4 out of 5 remaining CO-OPs once again owed money

On June 30, 2017, HHS published the risk adjustment report for 2016. Maine Community Health Options was once again the only remaining CO-OP to receive funding under the risk adjustment program; they got $9.1 million.

The report also detailed the amount that insurers owe or would receive for 2016 under the ACA’s temporary reinsurance program (2016 was the last year for the reinsurance program). All five of the remaining CO-OPs received money from the 2016 reinsurance program, but in most cases, it was not as much as they had to pay out under the risk adjustment program.

Maine Community Health Options — the only remaining CO-OP receiving funding under the risk adjustment program for 2016 — also received $21 million under the 2016 reinsurance program, which was far more than any of the other CO-OPs received.

Minuteman, which closed at the end of 2017, had to pay $25.4 million in risk adjustment for 2016 (but received $3 million in reinsurance). Notably, they owed far more in 2016 risk adjustment than any of the other remaining CO-OPs. They explained in June 2017, in conjunction with their announcement that they would no longer be a CO-OP after 2017 (at that point, they hoped to re-open as a for-profit insurer, but that plan was scrapped when they were unable to raise enough capital to secure a license for 2018), that the amount they had been forced to pay into the risk adjustment program amounted to about a third of the premiums they had collected.

2017 risk adjustment

On July 9, 2018, CMS published the risk adjustment report for 2017, showing which insurers owed money into the program, and which would receive money. Ironically, this came just three days after CMS had announced that they would freeze risk adjustment transfers as a result of the New Mexico court ruling regarding the risk adjustment methodology. But by the end of July, the risk adjustment program had been restarted, and payments to insurers were expected to be made on schedule, in the fall of 2018.

But once again, CHO was the only CO-OP that will receive funds under the risk adjustment program for 2017. The other three remaining CO-OPs all owed money:

2016: New HHS regulations to stabilize CO-OPs, but ultimately too little too late for most CO-OPs

In May 2016, after extensive input from stakeholders, HHS issued new regulations in an effort to help the remaining CO-OPs become financially viable. Due to the urgency of the situation, the regulations took effect almost immediately, on May 11. The new regulations made a variety of changes to make it easier for CO-OPs to seek outside investments and expand their coverage offerings beyond the individual and small group markets:

Membership surpassed a million enrollees by 2015, declined sharply with CO-OP closures, now holds fairly steady

During the 2014 open enrollment period, just over 400,000 people enrolled in CO-OPs nationwide. That climbed to over a million by the end of the 2015 open enrollment period – despite the fact that CoOpportunity (Iowa and Nebraska) stopped selling policies in December 2014, and their once-robust enrollment (120,000 members) had dropped to about 2,000 people by mid-February 2015. While enrollment in private plans through the exchanges increased by 46 percent in 2015 (from 8 million people in the first open enrollment period, to 11.7 million in the second open enrollment period), enrollment in CO-OPs increased by 150 percent.

At the end of 2015, however, more than 500,000 of those enrollees had to switch to a different plan, as 11 of the 22 remaining CO-OPs closed at the end of 2015 (in large part due to the fact that insurers did not receive most of the risk corridor money they were owed for 2014). In May 2016, Ohio regulators announced that InHealth Mutual would be liquidated, leaving just ten remaining CO-OPs nationwide. And only three of them were not subject to enhanced federal oversight as of 2016: New Mexico Health Connections, Mountain Health Cooperative (Montana and Idaho), and Minuteman Health, Inc (Massachusetts and New Hampshire). The other eight CO-OPs still in operation at that point were all under “corrective action plans” from the federal government.

Seven of the eleven CO-OPs that were still operational at the end of 2015 had at least 25,000 enrollees as of mid-2015, which was the minimum number that CMS said was necessary for financial solvency. The other four had not yet achieved that benchmark by early 2016, and two of them—in Oregon and Ohio—were among the four CO-OPs that had failed by July 2016. Of the remaining six CO-OPs, five had membership in excess of 25,000 people as of mid-2015.

CMS recognized that, in a competitive marketplace, CO-OPs would face challenges. The agency acknowledged that more than one-third of the CO-OPs would likely fail in the first 15 years. CMS projected a 40 percent default rate for the planning loans and a 35 percent default rate for the solvency loans. But with only four of 23 CO-OPs still in business as of 2018, the failure rate is 83 percent, after four and a half years of operations.

The remaining CO-OPs had roughly the following enrollment totals as of 2023, including individual and group plans (citations above)

How many CO-OPs have failed?

Since 2013, 20 of the original 23 CO-OPs have closed.

A timeline of the CO-OP closures

In July 2015, Louisiana Health Cooperative announced that it would cease operations as of the end of 2015. LHC was the second CO-OP to fail; CoOpportunity, which served Nebraska and Iowa, received liquidation orders from state regulators in February 2015.

At the end of August, the Nevada Health CO-OP announced they would also close at the end of 2015. And in September, New York officials announced that Health Republic of New York, the nation’s largest CO-OP, would begin winding down operations immediately, and that individual Health Republic of NY policies would terminate at the end of 2015.

On October 1, 2015 the federal government notified health insurance carriers across the country that risk corridors payments from 2014 would only amount to 12.6 percent of the total owed to the carriers. The program is budget neutral as a result of the 2015 benefit and payment parameters released by HHS in March 2014. And the “Cromnibus bill” that was passed at the end of 2014 eliminated the possibility of the risk corridors program being anything but budget neutral, despite the fact that HHS had said they would adjust the program as necessary going forward.

But very few carriers had lower-than-expected claims in 2014. So the payments into the risk corridors program were far less than the amount owed to carriers – and the result is that the carriers essentially get an IOU for a total of $2.5 billion that may or may not be recouped with 2015 and 2016 risk corridors funding (risk corridors still have to be budget neutral in 2015 and 2016, so if there’s a shortfall again, carriers would fall even further into the red).

Many health insurance carriers – particularly smaller, newer companies – faced financial difficulties as a result of the risk corridors shortfall. CO-OPs were particularly vulnerable because they were all start-ups and tended to be relatively small. All of the CO-OPs that announced closures in the last quarter of 2015 attributed their failure to the risk corridor payment shortfall.

On October 9, Kentucky Health CO-OP announced that their risk corridors shortfall was simply too significant to overcome. (The CO-OP was supposed to receive $77 million, but was only going to get $9.7 million as a result of the shortfall.) The CO-OP did not offer plans for 2016, and their 2015 policies terminated at the end of the year. About 51,000 CO-OP members in Kentucky had to shop for new coverage for 2016.

And then on October 14, Tennessee regulators announced that Community Health Alliance would also close at the end of the year. CHA stopped enrolling new members in January 2015, but it had planned to sell policies during the 2016 open enrollment period, albeit with a 44.7 percent rate increase. Ultimately, the risk of the CO-OP’s failure in 2016 was too great, and it wound down operations by the end of the year instead.

Two days later, on October 16, Colorado Health OP was decertified from the exchange by the Colorado Division of Insurance, resulting in the CO-OP’s demise; Colorado Health OP’s 80,000 individual members all needed to transition to new carriers for 2016.

Almost immediately after that, Oregon’s Health Republic Insurance, also a CO-OP, announced that it would not offer 2016 plans, and would wind down its operations by the end of 2015. Health Republic had 15,000 members.

On October 22, The South Carolina Department of Insurance announced that Consumers Choice would voluntarily wind down its operations by year-end, and would not sell plans for 2016. Consumers Choice was run by the same CEO – Jerry Burgess – as Community Health Alliance in Tennessee. 67,000 Consumers Choice members had to switch to a new carrier for 2016.

On October 27, the Utah Insurance Department announced that they were placing Arches Health Plan in receivership, and the carrier would wind down operations by the end of the year. Arches Health Plan garnered roughly a quarter of Utah’s exchange market share in 2015, but those enrollees had to switch to a new carrier for 2016.

On October 30, just two days before the start of the 2016 open enrollment period, the Arizona Department of Insurance announced that Meritus would cease selling and renewing coverage, and existing plans would terminate at the end of 2015. Healthcare.gov removed Meritus plans from the exchange website, and current enrollees — who comprised roughly a third of the private plan enrollees in the Arizona exchange at that point — had to obtain new coverage for 2016. Meritus was unique in that they allowed people to enroll off-exchange year-round up until late-summer 2015. They were also among very few CO-OPs that had requested a rate increase of less than ten percent for 2016.

Open enrollment for 2016 coverage began on November 1, 2015, and coverage was still available at that point from the remaining 12 CO-OPs. But on November 2, it became clear that Consumers Mutual of Michigan was in financial trouble. The carrier announced that they would not offer plans in the exchange in 2016, although at that point, there was still a possibility that they would continue to offer plans outside the exchange. But on November 4, they announced that they would wind down their operations by the end of the year, and all 28,000 members would need to find new coverage for 2016.

In May 2016, state regulators in Ohio announced that InHealth Mutual would shut down and that members would have a 60 day special enrollment period to select a new plan.

In July 2016, state regulators in Connecticut announced that HealthyCT would shut down at the end of 2016 (employer groups were able to keep their coverage through the renewal date in 2017, as long as the plan’s renewal date in 2016 was July or earlier).

In July 2016, state regulators in Oregon announced that Oregon Health CO-OP would shut down at the end of July 2016.

In July 2016, state regulators in Illinois announced that they were beginning the process of taking over Land of Lincoln Health and winding down the CO-OP’s operations. A special enrollment period was created for the CO-OP’s 49,000 enrollees.

In September 2016, state regulators in New Jersey placed Health Republic Insurance of New Jersey into rehabilitation, and the CO-OP ceased selling new plans. Health Republic’s existing plans terminated at the end of 2016.

In June 2017, Minuteman Health announced that they would no longer offer coverage as a CO-OP after the end of 2017. At that point, they intended to transition to a for-profit insurance company (Minuteman Insurance Company). However, they were unable to raise enough capital by the August 2017 deadline for securing a license for 2018, and thus did not re-open as a for-profit insurer. Minuteman Health is in receivership, and enrollees needed to obtain new coverage for 2018.

In July 2017, Maryland regulators issued an administrative order blocking Evergreen Health from selling or renewing any plans (they only had group plans in force at that point, having terminated individual market plans at the end of 2016). The order noted that it was expected that the process would culminate in receivership, and the receivership announcement came by the end of July.

The four CO-OPs that were still operational as of 2018 were all still operational in 2020. But New Mexico Health Connections closed at the end of 2020, leaving just three CO-OPs still operational in five states as of 2021.

CO-OPs’ unique challenges

In July 2015, HHS released financial and enrollment data for the 23 CO-OPs, as of December 2014. The outlook based on the report was not particularly great: all but one of the CO-OPs operated at a loss in 2014, and 13 of the CO-OPs fell far short of their enrollment goals for 2014. The audit called into question the CO-OPs’ ability to repay the loans that they received from the federal government under Obamacare.

The risk corridor shortfall was directly implicated in the failure of CO-OPs in Kentucky, Tennessee, Colorado, Oregon, South Carolina, Utah, Arizona, and Michigan. There is no way around the fact that such a significant financial blow is hard to overcome, particularly for carriers that were new to the market in 2014. Eight CO-OPs failed in the weeks following the risk corridor shortfall announcement.

Those eight CO-OPs were in serious financial jeopardy as a result of the risk corridor shortfall and other factors, and state Insurance Commissioners made the difficult decision to shut them down prior to the start of open enrollment, or shortly thereafter. It’s much less complicated to wind down operations in an orderly fashion in the last couple months of a year than it is to have a carrier become financially insolvent mid-year.

That, coupled with the late announcement regarding the risk corridors shortfall, explains the rash of CO-OP failures announced in late 2015. It should be noted that it was not just CO-OPs feeling the pain from the risk corridor shortfall; in Wisconsin, Anthem exited the exchange market in three counties and scaled back operations in 34 other counties for 2016, partially as a result of the risk corridor shortfall. And in Wyoming, WINhealth exited the individual market because of the risk corridor shortfall; in Alaska and Oregon, Moda nearly exited the market for 2016, due in large part to the risk corridor shortfall (Moda ultimately left Alaska’s market at the end of 2016, in order to focus fully on the Oregon market).

But with 12 out of 23 CO-OPs going under in 2015, it wasn’t surprising that the mood in late 2015 was relatively pessimistic regarding the CO-OP model. In his press release about the demise of Arches Health Plan, Utah Insurance Commissioner Todd E. Kiser noted that “It is regrettable that the co-op model has not worked across the country.” That didn’t bode well for the remaining 11 CO-OPs, and ultimately only four of them are still operational in 2018.

All 11 of the remaining CO-OPs suffered losses in 2015, amounting to a total of about $400 million (Evergreen lost the least, at $10.8 million; Land of Lincoln lost the most, at $90.8 million). The bulk of the losses were in the fourth quarter, indicating that consumers try to get as much value as possible from their coverage before the end of the plan year.

The fact that lawmakers decided at the end of 2014 to retroactively require the risk corridors program to be budget-neutral was a significant blow to the CO-OPs. The CO-OPs – along with the rest of the carriers – had set their premiums for 2014 (and by that time, for 2015 as well) with the expectation that risk corridors payments would mitigate losses if they experienced higher-than-expected claims.

Clearly, that did not pan out, and it certainly put the CO-OPs in a tough spot. To clarify, HHS said in 2013 that the risk corridor program would NOT be budget-neutral, and that federal funds would be used to make up any shortfalls; carriers set their rates for 2014 based on that.

But then in 2014, HHS announced in 2014 that they had made several adjustments to the risk corridor program, and that they projected “that these changes, in combination with the changes to the reinsurance program finalized in this rule, will result in net payments that are budget neutral in 2014. We intend to implement this program in a budget neutral manner, and may make future adjustments, either upward or downward to this program (for example, as discussed below, we may modify the ceiling on allowable administrative costs) to the extent necessary to achieve this goal.” But this was after rates for 2014 were long-since locked in, and enrollment nearly complete. At the end of 2014, congress passed the Cromnibus Bill, requiring risk corridors to be budget neutral, with no wiggle room for HHS.

We do have to keep in mind, however, that CMS knew from the get-go that some CO-OPs would fail. They expected at least a third of them to fail in the first 15 years, and that was long before the risk corridors program was retroactively changed to be budget neutral.

Will the few remaining CO-OPs survive?

Time will tell, but the remaining three CO-OPs have now lasted a full decade, and are heading into their 11th year in 2024; they are no longer “new” insurers.

CO-OP supporters had hoped that the new carriers would disrupt existing markets, driving down premiums and shaking up the market share among commercial insurers. Although most of the CO-OPs struggled financially, average premiums market-wide were lower in both 2014 and 2015 in states that had CO-OPs than in states without CO-OPs.

CMS acknowledged from the start that not all of the CO-OPs would be likely to succeed — just as a crop of new for-profit health insurance carriers wouldn’t all be expected to succeed. The three remaining CO-OPs have all demonstrated staying power and appear to have beaten the odds, at least for now.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.

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