CO-OP (Consumer Operated and Oriented Plan)

Update – Insurance Commissioner requests CoOportunity liquidation – district court to decide in late February

Concluding that insufficient funds currently exist to meet its obligations to pay medical claims, Iowa Insurance Commissioner, Nick Gerhart, filed a petition in Polk County District Court on January 29, 2015, concluding that further efforts toward rehabilitation of CoOportunity would be futile and asking for court-ordered liquidation of this non-nonprofit insurer. The Commissioner’s petition cites several factors affecting CoOportunity’s asset position, including congressional action placing an estimated $81 million in risk funding CoOportunity was slated to receive at risk; CMS’s decision in December to not advance additional 2014 funds to CoOportunity; and the unavailability of 2015 federal loan funds until late in 2015. The petition concludes that “further transaction of business by CoOportunity would be financially hazardous to policyholders, creditors, and the public.”

A hearing on liquidation is expected to occur in late February, with court-ordered liquidation expected to take effect as of February 28. Upon liquidation, the Insurance Division will take possession of CoOportunity’s assets and will administer those assets under court supervision. State guaranty funds in Iowa and Nebraska will be utilized to meet payment obligations for claims submitted by CoOportunity insureds up to limits set in law.

Commissioner Gerhart continues to advise Iowans with CoOportunity coverage to find other coverage. “Individuals and employer groups are strongly encouraged to find coverage with another insurance company and then cancel their policy with CoOportunity Health as soon as possible.” The Commissioner particularly advises individuals who purchased CoOportunity coverage through Iowa’s marketplace exchange and who are receiving advance premium tax credits and cost sharing reductions to find alternative coverage through the marketplace exchange by March 1, with open enrollment ending on February 15; while there will be a special enrollment period from March 1-April 29, 2015, to avoid having a gap in financial assistance, those individuals must meet March 1 coverage requirements. Individuals are encouraged to call the marketplace center at 1-800-706-7893 or work with an agent, broker, navigator, or consumer assistance counselor.

The Insurance Division has several informational postings, including CoOportunity alerts for persons insured by CoOportunity and for providers, on its website at www.iid.state.ia.us. The Division also has posted the following frequently asked questions (FAQs) and guidance documents.

  • FAQs for individuals.
  • FAQs for small groups.
  • Guidance on tax credits for certain small employers that cannot offer a qualified health plan (QHP) through the Small Business Health Options Program (SHOP) Exchange because  the employer’s principal business address is in a county in Iowa in which a QHP through the SHOP Exchange is not available for all or part of 2015.

CoOportunity Health

In what came as a surprise to many, Iowa’s Insurance Commissioner, Nick Gerhart, filed a petition in Polk County District Court on December 23, seeking court authorization under state insurance laws to assume management authority over CoOportunity Health, Inc., toward the end of rehabilitating the company’s substantially declining financial stability. The district court granted the order on that same day, transferring the company’s assets to the commissioner for administration and control. CoOportunity’s board of directors elected not to oppose the petition. The Nebraska Insurance Commissioner has suspended CoOportunity’s authority to do business in that state in light of the Iowa action.

Iowa insurance laws permit insurance division rehabilitation efforts when an insurer no longer evidences sufficient financial strength to meet its ongoing financial obligations to policyholders. The commissioner’s petition noted that CoOportunity at this time is solvent, but its current lack of needed additional revenues places it in a “financially hazardous” condition. The goal of the commissioner is rehabilitation but if not feasible, the company’s assets will be liquidated. Purchase by another insurer is a possibility.

In its first year of operations, CoOportunity–a non-profit insurer domiciled in Iowa and operating both in Iowa and Nebraska under both states’ laws and rules of the newly established federal health insurance CO-OP (Consumer Operated and Oriented Plan) program, had experienced early program success by enrolling an unanticipated 120,000 Iowans and Nebraskans through individual and small group policies. At the same time, however, the company experienced high unanticipated losses, leading to a drop in assets from $121.5 million to $17 million at the time of the petition’s filing. A $45.7 million net loss experienced by the company in the first 10 months of 2014 operations equated, the commissioner said, to “a 66% loss to remaining surpluses.” From November through December 12, the company’s assets continued to decline, dropping from $47.1 million to $17.2 million, a level and operational trend that threatened the ability of the company to meet its future health claim obligations to its policyholders.

Immediate sources of needed monies could not be identified. The federal Centers for Medicare & Medicaid Services (CMS), which provided start-up loan funding for CO-OPs, recently informed CoOportunity that it would not receive additional loans in this last round of funding. CoOportunity has received $130.6 million in solvency loan funds and $15.4 million in operational loan funds from CMS, including loan funds of $32.7 million awarded to the company at the end of September. The company is slated to receive an additional $125.6 million from other CMS program sources, but not until the second half of 2015 and $60 million of that amount is currently threatened by potential congressional budget action.

The Insurance Division cites “extremely high health care utilization” as a major factor affecting CoOportunity’s deteriorating asset position.

The Insurance Division, in frequently asked questions (FAQs) posted on its website (http://www.iid.state.ia.us/node/9885312), helps policyholders to understand what this step toward regulatory rehabilitation means to them. To have continued coverage, policyholders must pay their premiums. Claims may continue to be submitted through CoOportunity as usual. The Division “will control the company and ensure that claims are paid according to contract provisions.” Even if rehabilitation is not successful and the company is liquidated, state insurance laws protect policyholders and their claims up to $500,000 per insured person.

The FAQs further clarify that coverage with CoOportunity during rehabilitation “should not impact your provider’s standing with CoOportunity.” The Division, however, notes that providers currently in the CoOportunity network may opt to leave that network and advises policyholders to contact their providers to make sure they remain in network.

The Division further advises: “Most policyholders may find it in their best interests to find other coverage before the end of open enrollment” which closes February 15, 2015. The Nebraska Insurance Department has similarly advised policyholders in that state.