Community Health Options (CHO) has decided to increase prices for patients and customers next year– the latest sign that this Obamacare health co-op is teetering on the brink of a total collapse.
The state’s largest provider of individual health insurance, CHO has also stopped accepting new customers because of its poor financial situation after ending 2015 with a shocking $31 million deficit. It is predicted to lose another $43 million in 2016.
But sadly, there doesn’t seem to be an end in sight to this financial madness.
Missing the mark
CHO, which provides health insurance coverage nearly 71,000 people in Maine, is essentially a non-profit health insurance company. It was created by Obamacare as a supposed low-cost alternative to private health insurance, and a solution to the rising costs of health care. The architects of Obamacare claimed that health co-ops like CHO would lower prices, increase competition, and encourage private insurance companies to lower their own rates.
However, CHO and the 22 other health care co-ops have been nothing short of a disaster. They needed roughly $2.4 billion in federal loans just to get started– and none of those taxpayer dollars have ever been repaid. Most of the co-ops never even got off the ground, with all but two of them still losing money by 2014. That same year, thirteen of these co-ops failed to hit their projected enrollments. Now, twelve of them have collapsed and disappeared forever.
CHO appeared to be somewhat of a bright spot in the mess of these co-ops. It started 2014 with $132 million in taxpayer money from the federal government, and was one of only two Maine companies that offered plans in the Obamacare marketplace. It quickly became Maine’s largest individual health insurance provider, as it offered the cheapest option in nearly every insurance category. In 2014, it was the only co-op to turn a profit, bringing in a net income of $7.3 million.
Yet, it soon fell victim to sky-high health care costs, which is ironically the very thing it was designed to eliminate. The co-op spent about $217 million on medical costs in the first nine months of 2015, which is 71 percent higher than what it spent in all of 2014.
Now, the co-op is spending roughly 89 percent of its income from premiums (which is its primary source of revenue) on medical costs and claims. This is dangerously high, as experts warn that health insurance providers should never spend any more 85 percent of their premium income on medical costs. The co-op has also frozen pay rates for all of its employees, except for its executives, who have taken a 10 percent pay cut.
The State of Maine even attempted to take control over CHO this year, to help save the organization and right this sinking ship. However, the federal government rejected the plan, because it realized that Maine would have had to slim down the organization and push some policy holders to private insurance companies. That would have saved money and possibly made the organization profitable – but it also would have gone against the mandates imposed by Obamacare.
However, even with all of these ominous signs, the co-op is still maintaining that it has a bright future, and that there is no reason to panic.
Not admitting Defeat
“We’re very confident,” said CHO spokesperson Michael Gendreau about the prospects of turning the organization around in 2017.
“We’re in regular communication with the Bureau of Insurance in Maine and New Hampshire as we look to 2017 and stay focused on an affordable product. We will return to positive financials in 2017.”
But given the troubling developments at CHO, patients, customers and taxpayers should be very worried. Experts warn that the deteriorating financial condition of many of the nation’s co-ops, including CHO, could spell disaster.
“Clearly the remaining health care co-ops are in dire circumstances,” said health care consultant Robert Laszewski. “I don’t know how any of them can survive another year.”
Standard and Poor, one of the world’s premier financial rating companies, also warns that trouble could be in store for many of the co-ops. “What it comes down to is they need to turn a profit very quickly because the funding source is drying up,” said analyst Deep Banerjee.
So with CHO appearing to be circling the drain, it’s seems that the $134 million in taxpayer money it received will likely be lost forever, and the 71,000 patients in Maine who depend on CHO could soon be left without insurance coverage.