Colorado Health Insurance COOP Closed

CO COOPLast Friday, Colorado’s Division of Insurance ordered the state’s Obamacare COOP not to offer policies in the state’s Obamacare exchange next year. Obamacare’s COOPs are cascading into collapse quite quickly. NCPA has been studying them since last June, and our research has been prescient.

Obamacare COOPs were specifically stood up by the Affordable Care Act with government loans. They cannot hide their Obamacare losses like larger, incumbent insurers (for which Obamacare exchanges are small parts of their businesses) can.

To show how fast the fall of this COOP has happened, I’ll share three stories:

First, from November, here’s the Colorado HealthOP’s CEO bragging about her low premiums as Obamacare’s second open season rolls out:

Colorado HealthOP chief executive Julia Hutchins said critics and competitors who say their aggressive pricing for the second open enrollment was an attempt to buy up market share have the wrong spin on things. The CO-OP is a fundamentally different approach, she said.

“We’re a nonprofit. We’re not trying to buy anything,” Hutchins said. “We were created to serve everybody.”

(Electa Draper, “Colorado Health CO-OP build to shake up state insurance marketplace,” Denver Post, November 17, 2014.)

Second, after the end of the second open season, here she is explaining how her grabbing huge market share through low premiums is a good business practice:

Colorado HealthOP, one of 23 CO-OPs nationwide, reduced premiums on its middle-tier, or silver, plans by an average of 10 percent. Its customer count shot up from about 14,200 in late 2014 to about 75,000 this enrollment period.

“We’re right about where we projected we’d be,” said HealthOP chief executive Julia Hutchins. “Growth is really important for stability. You really need a big pool to spread risk effectively.”

(Electa Draper, “Colorado HealthOP’s surge on insurance exchange carries red flag,” Denver Post, March 16, 2015.)

Finally, here is Colorado HealthOP’s press release, looking back in anger, in response to the regulator’s decision:

This morning, the Colorado Division of Insurance (DOI) announced that Colorado HealthOP will not be able to sell its plans on the Connect for Health Colorado marketplace.

Colorado HealthOP’s closure is the latest in a series of CO-OP shut downs across the country, spurred by the federal government’s failure to pay billions of dollars in promised funding.

(Colorado HealthOP, “Colorado HealthOP vows to fight for member interest after Division of Insurance’s closure decision,” press release, October 16, 2015.)

So, the COOPs’ business plans did not fail. It is the taxpayers who failed. The COOPs expected to be able to go back to Congress for unlimited bailouts. Too often, this is a credible strategy for businesses dependent on government. Unfortunately for the COOPs, the taxpayers chose to elect representatives who were not interested in continuing this game.

Comments (2)

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  1. Barry Carol says:

    Ah, estimating actuarial risk isn’t so easy as I’ve often said. Even the risk corridors don’t fully reimburse insurers for their losses.

    These Cooperatives that significantly underpriced their product(s) deserve to fail.

  2. John Fembup says:

    Yes, BC – – and isn’t it interesting how fast these novices running the co-ops changed their tune from high margins to high medical costs.