Maryland Lets Investors Acquire Its CO-OP

Health insurers realign

(Photo: Thinkstock) (Photo: Thinkstock)

A group of investors has pulled Evergreen Health out of a troubled Affordable Care Act program that originally was supposed to create a new breed of nonprofit, member-owned health insurers.

The Maryland Insurance Administration approved an application by a Maryland-based investment team to acquire the state's Consumer Operated and Oriented Program plan.

(Related: Maryland CO-OP Withdraws From 2017 Individual Health Market)

The team includes JARS Health Investments, a group of local health care executives, and two hospital-led health care systems, Anne Arundel Health System and LifeBridge Health.

Kent Conrad, Max Baucus and other former senators from the upper Midwest pushed for Affordable Care Act drafters to put CO-OP startup funding in the health law, as an alternative to adding a government-run public health coverage option.

When the senators who backed the CO-OP system left the Senate, the CO-OPs became political orphans. Officials in the administration of former President Barack Obama lent CO-OP funding to nonprofit groups that wanted to start CO-OPs, but they put tight restrictions on the CO-OP plans' ability to use the money for marketing, blocked the plans from getting money or management help from existing for-profit or nonprofit insurers, and prohibited the member owners of the plans from ever selling the plans.

The ban on ownership sales kept the CO-OPs from using their assets to get conventional loans, or from using stock to win support from venture capital firms.

A CO-OP that served Iowa and Nebraska failed in late 2014, and many more failed in 2015, when Obama administration officials announced that an Affordable Care Act insurer support program, the risk corridors program, had collected only enough revenue to pay about 13% of the insurer support promised for 2014.

Obama administration officials backed away from the ban on CO-OP sales last year and ruled that states can approve the sale of failing CO-OPs.

Aside from Evergreen Health, the CO-OPs still in operation are those in Maine, Massachusetts, New Hampshire, Montana, New Mexico, and Wisconsin.

In related news, investors have announced several other health insurance-related deals.

Friday Health Plans Inc., a for-profit, Denver-based company formerly known as Melody Health Insurance, has acquired Colorado Choice Health Plans, a nonprofit carrier that serves Colorado's San Luis Valley. Friday Health says its wants to provide health coverage in Colorado with an "individual, service-oriented focus."

Oscar Insurance Corp., a New York-based, venture-funded startup formed outside the CO-OP system, made two alliances in an effort to expand its reach. The company, which lost about $200 million in 2016 but started 2016 with a market value of about $2.7 billion, will be working through HealthPass New York , a private health insurance exchange, to offer group health coverage in New York City and nearby counties.

The company also made a deal with Cleveland Clinic to offer co-branded individual health insurance plans in Northeast Ohio. The companies plan to work together to offer individual coverage inside and outside the Affordable Care Act public health insurance exchange system in 2018.

--- Read Reid Lugs Out Senate Health Bill on ThinkAdvisor.

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