Well, the news is out and the perfect solution initiated by the Affordable Care Act, Cooperatives, are starting to fall apart. Cooportunity Health, the CoOp for Nebraska and Iowa has been taken over by the Iowa Department of Insurance. Anyone who didn’t see this coming needs to go back to school and take some basic math. The fact that the rates were in many cases 30% less than the competition, they rented a network, and paid commissions at twice the amount of any other carrier, should have been an obvious clue. The good thing is that since they paid commissions at twice the normal rate, even if you don’t get commissions for a year, it would equal out. Just kidding, don’t start worrying about your commissions. In addition to the above information, the business plan that they started under was to obtain 12,000 members in the first year. Instead, they took on 120,000 members. Any business person understands that good growth is good and explosive growth blows things up. By taking on 10 times the amount of business, they also took on 10 times the amount of risk and without having the ability to raise capital from owners; they were destined to have problems. We knew their longevity was in question but I felt that they would last at least 18 months especially since they had $150,000,000 of our tax dollars as well as all the money they received from premiums. Nope, less than one calendar year is all it took.
I have cautioned our brokers over the last year to be honest with their clients about this carrier. Ultimately, the client has to decide the best option but my hope is that their professional agent explained that this model was concerning.
Since the announcement, I have had brokers ask if the other carriers will honor the Cooportunity rates. Really? Do you really think that other carriers want to find themselves in “Rehab” a year from now? Unfortunately, the public is about to find out the true costs of the ACA. The rates they were seeing were artificial because of Cooportunity. Now reality will hit them and they will experience 30-40-60% increases even with limited networks.
At OCI, we are looking for the best solutions for each of our partners. Maybe in the future, price will play a much smaller role in the decision making process. Quality of the carrier including service and claims, as well as solid business practices should be part of the decision process.
With all that said, I hope that Cooportunity is able to survive the situation. Good competition makes everyone better. We are seeing changes to the health care system with introduction of narrow networks, new pricing strategies, and more consumerism as individuals start absorbing some of the costs.
We at OCI appreciate our broker partners and will do everything we can to help them in these turbulent times. Keeping everyone informed is job one. Our carrier partners also benefit from our expertise and systems that will make transitioning simple if that were to become necessary.
My hope for you and for everyone is to have a wonderful and profitable 2015.