Nevada's Obamacare non-profit insurance co-op going belly-up
Nevada Health CO-OP, a non-profit insurer created by Obamacare and given $66 million in start-up loans, will cease operations on January 1 of next year.
The cause of the co-op's downfall is attributed to "market realities."
Co-op CEO Pam Egan said a second year of high claims costs and limited growth projections for enrollment made it "clear" the insurer would have a hard time providing "quality care at reasonable rates" in 2016.
"(Nevada Health CO-OP) is working responsibly and proactively with the Nevada Division of Insurance and the Centers for Medicare and Medicaid Services to ensure that we meet all deadlines and fulfill obligations to our current members," Egan said.
The nonprofit said members' policies will stay in effect through Dec. 31, and it is committed to fulfilling obligations to enrollees. It also said it will continue paying broker commissions.
Amid reports that the Affordable Care Act has slashed the nation's share of uninsured from more than 17 percent to less than 12 percent, the co-op's fate is a reminder that some components of the law don't work as intended.
Observers say the co-op, as idealistic as its origins were, could not survive market realities amid early troubles with doctor networks, reimbursements, off-exchange coverage and administrative costs. The co-op's failure is something of a blow to the state's competitive landscape, and it's unclear if it can repay $65.9 million in federal loans it received for its 2012 launch.
Obamacare included member-run, locally based nonprofit insurers to increase competition for existing carriers. The idea initially worked: Nevada Health CO-OP had more than a third of the market in the 2013 enrollment period, beating out big, publicly traded competitors UnitedHealth Group and Anthem Blue Cross and Blue Shield.
But the market balanced out in 2014 and 2015, and the co-op slipped out of the top spot. Recent financial statements show it struggling to make money.
The nonprofit reported a $19.3 million operating loss in 2014, and a $3.5 million first-quarter loss through March, according to Centers for Medicare and Medicaid Services records. From January through June, it lost $22.7 million.
Some local insurance brokers said they had reservations early on about the co-op.
Pat Casale, managing partner of The MultiCare Group in Las Vegas, said he sold few co-op plans because he "wanted to kick the tires and make sure the vehicle drove well." He said his clients gravitated toward established, multibillion-dollar insurers as a safer bet.
Imagine that. An insurance co-op that pays out more in benefits than it takes in because mostly sick people are drawn to it. This is probably the experience of many for-profit insurance companies taking part in the state exchanges. But those companies have a lifeline – a guarantee that 80% of costs over $45,000 will be borne by the taxpayer. There is also a "Risk Corridor Program" that limits losses for insurance companies.
In exchange for this taxpayer-funded generosity, insurance companies will keep premium increases to a reasonable level – at least for the first couple of years. There has been talk of ending these bailout programs, but Congress hasn't gotten around to it.
The failure of the Nevada co-op serves to highlight the booby traps that are still in Obamacare – too few healthy people paying for too many sick people. Eventually, the numbers won't add up for anybody, and the system will be threatened with collapse. At that point, Democrats will claim that the only salvation for the program will be a single-payer system run entirely by the government.
Just as they planned all along.