Community Health Options, which sells Affordable Care Act individual insurance in Maine, is in the black for the first time since 2015, and co-op officials say they expect to finish the year with a surplus.
The positive financial news follows two years of operating losses – $58 million in 2016 and $31 million in 2015.
But the cooperative ended the first quarter of 2017 with a $3.7 million surplus, according to filings with the Maine Bureau of Insurance.
“In a nutshell, we’re on solid footing as we move into 2018,” said Michael Gendreau, the cooperative’s director of education, outreach and communications.
Since 2016, the cooperative has been required to file monthly financial statements with the bureau of insurance as a way for state regulators to monitor the financial stability of the cooperative.
Gendreau said that based on how the year is going so far, CHO expects to end 2017 with a surplus, although the insurer doesn’t have a projection yet on how large the surplus may be.
CHO has about half of all ACA individual market enrollees – 42,000 of the 80,000 Mainers with ACA insurance have a CHO plan. Also selling plans on the Maine individual marketplace are Anthem and Harvard Pilgrim.
Much of the losses in 2015 and 2016 were caused by higher-than-expected claims and rates set too low, health experts have said.
When it started, CHO was hailed as a success story, as the startup captured about 80 percent of the individual market, met with President Obama in 2014 and expanded into New Hampshire. But in 2015 and 2016 the financial losses mounted, and the cooperative pulled out of the New Hampshire marketplace to focus on Maine.
For 2017, CHO raised individual premiums by an average of 25.5 percent and increased deductibles by as much as 470 percent for out-of-network care.
Federal tax credits and subsidies shield enrollees from the bulk of premium increases for those earning up to 400 percent of the federal poverty level (a family of four can earn up to $97,200), but those who earn above that amount must pay the full amount of premium increases.
Gendreau said CHO was able to pull itself out of the red by raising rates, lowering administrative costs and tamping down unnecessary health care costs. He said the insurer launched a pilot program at Maine Medical Center in Portland and St. Mary’s Regional Medical Center in Lewiston that was a public education campaign for its enrollees to teach them about proper use of medical services. For instance, patients were taught about when they should go to the emergency room, versus urgent care centers or primary care. Also, CHO focused on helping patients avoid unnecessary readmissions to hospitals.
Patients who unnecessarily go to the emergency room drive up health care costs, and reducing avoidable readmissions to hospitals helps keep costs down.
Gendreau said the pilot program has since been expanded to most of the state.
He said CHO is also helping patients with chronic conditions manage their conditions. Patients who better manage their chronic conditions are less likely to need to go to the emergency room, he said.
Emily Brostek, executive director of Consumers for Affordable Health Care, an Augusta-based health advocacy group, said the ACA is still a relatively new law, and insurers are learning how to price plans appropriately. Community Health Options was a new insurer trying to set prices in a new marketplace, so it’s not surprising that it made mistakes, she said.
“This is very good news,” Brostek said of the first-quarter report. She said insurance companies now have a few years of claims experience to base their pricing on. “Because insurers can only set their rates once a year, if they price it incorrectly it takes a long time to catch up,” she said.
CHO was formed with a $65 million federal loan in 2012, as the ACA created the nonprofit co-ops to help stimulate choices in the state-based marketplaces. Maine was one of 23 states where cooperatives started up, but the co-ops in many states have since been experiencing financial problems.
On May 4, the U.S. House narrowly approved a health care bill that would replace the ACA. The Senate has yet to take action. Whatever changes emerge from Congress could have a significant impact on the individual marketplace.
Joe Lawlor can be contacted at 791-6376 or at:
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