Connecticut Insurance Company Succeeds Where Others Are Failing
Half of the nearly two dozen Consumer Operated and Oriented Plans created by the Affordable Care Act have failed and won’t be offering health insurance in 2016. However, the nonprofit insurer created by the Connecticut State Medical Society is still in business.
The nonprofit insurer, HealthyCT, opened to Connecticut consumers for the first time in 2014 and will be offering plans for 2016.
The company was largely funded by the federal government and was created to compete with established health insurance companies, such as Anthem and UnitedHealthcare.
But in its first year of operation, HealthyCT didn’t attract the market share that its organizers had hoped it would, and only had about three percent of the market when enrollment closed in 2014.
However, HealthyCT CEO Kenneth Lalime said the low market share ended up being helpful.
“Lower membership contributed in positive way to us not having that type of exposure,” Lalime said.
New York’s co-op, Health Republic Insurance of New York, had more than 155,000 members and was one of the largest of the 23 co-ops created under the ACA.
But having a higher number of members exposed the company to a higher level of risk.
HealthyCT largely avoided that risk by building its membership slowly. After three years, it has 36,000 members and it has gone after the small and large group market in addition to the individual marketplace.
Before this current enrollment period, HealthyCT had 18 percent of the health insurance market on the exchange.
“Membership isn’t the ticket,” Lalime said. “Rapid membership growth can be difficult if you don’t have the right balancing of financing.”
Lalime credits the amount of financing HealthyCT received from the federal government as the number one reason it’s still in business.
In total, Lalime said the organization has received about $18 million for start-up costs and $108 million in solvency dollars, and remains “well capitalized.”
Having that money to pay claims is one of the most important things for a regulated insurance company, he said. The company’s capital was crucial to insurance regulators, who were following the creation of the co-op closely.
It was the only time in 30 years Connecticut had seen a new insurance company, Lalime said.
Nationwide, the 23 new co-ops received $2.4 billion in federal loans to help pay startup costs and to meet state solvency requirements.
Lalime said the question about why other co-cops failed where HealthyCT succeeded may simply be answered with mathematics.
Those companies that failed could have a population with a low medical loss ratio and be forced to pay more into a pool of insurance companies. These so-called “risk corridors” were created by the ACA to compensate insurance companies, who were being asked for the first time to sell insurance to everyone regardless of pre-existing medical conditions.
The margin of error in some of these calculations is much tougher for start-up companies.
Lalime credits the team of experienced insurance executives he was able to build with helping HealthyCT navigate some of this unknown territory.
HealthyCT was also lucky to build a great network of doctors and hospitals in a short amount of time. Having a great network “in the state of Connecticut, it’s an absolute,” Lalime said.
He said they wouldn’t have the small and large group customers they have without an adequate network of healthcare providers. He estimated they have about 98 percent of all the providers in the state.
But the future of the nonprofit co-ops is still an unknown.
Lalime said they may actually lose enrollment on the individual side this year because they aren’t the lowest priced plan on the exchange. However, he expects to gain enrollment in the small and large group marketplace.
Going forward, Lalime said they are working with the federal government, which has ended its federal loan program. In the meantime, they are looking for partners to keep the remaining co-ops thriving in the marketplace.
Nonprofit cooperatives in New York, Iowa, Colorado, Nevada, and Michigan have closed.