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Portfolio > Mutual Funds

LTCI Watch: CO-OPs

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First: If you have a chronic illness, and references to the Patient Protection and Affordable Care Act (PPACA) aggravate that illness, please consult with your medical, emotional or spiritual counselors before proceeding.

Anyhow: My thought is that it’s possible (not likely, but, a little bit possible) that PPACA will increase interest in mutual insurance companies, and especially nonprofit mutual insurance companies.

If so, I’m wondering if that could have any effects on the long-term care insurance (LTCI) community.

I’m not an insurance agent, an insurance agent, an underwriter, an actuary or a psychic. I’m simply a reporter. I have no real basis in my own expertise for knowing whether PPACA will work or not work. I know that I wish everyone involved — the patients, the regulators, the brokers, the insurance company executives, the consumer group staffers, the doctors, the hospitals, the nursing homes, and anyone who clicks on this site well. May your 2014 be a pleasant 2014.

But I can speculate, simply based on my experience as a reporter, that any big new huge program that I’m writing about will have surprising bad points and surprising good points. The most earth-shattering PPACA angle that will fascinate everyone a year from now is likely to be something that I wrote about in passing but didn’t cover very well.

One candidate: The PPACA Consumer Operated and Oriented Plan (CO-OP) program — a PPACA program that’s supposed to fund the creation of nonprofit, member-owned health plans.

Would be organizers in 24 states secured startup funding from HHS before Congress cut off the spigot in January.

One general rule of thumb is that 90 percent of everything is usually bad, so, it seems reasonable to think that a fair number of those CO-OPs might be bad. But it could be that some, or most, of the CO-OPs will be fine. Maybe one will be great.

Maybe just the fact that they are out there hiring PR people to promote them will suddenly make the idea of doing business with a mutual insurer hot.

The pages of National Underwriter — one of the print publications that feed articles into — have been full of articles over the decades about massive shifts of focus from stock companies, to mutuals, and back to stock companies again.

The general idea is that stock companies are too focused on short-term performance to stay in markets for long-term products (example: LTCI) through doldrums.

Once a mutualization wave reaches its zenith, some mutual has a leader who does what outside observers believe to be strange things with the mutual’s money, and then commentarazzi clamor for the industry to shift away from depending on opaque mutual insurers, toward stock company insurers cleansed of inefficiency by Wall Street money managers.

Mutual and nonprofit companies haven’t been sending me many press releases lately about how great their LTCI divisions have been doing and how much more LTCI they want to write, but they haven’t been rushing to shut down their LTCI operations, either.

Mutuals have less direct access to Wall Street than for-profit companies, but it seems as if there are ways for mutuals to get around that kind of problem. Maybe they could benefit from facing a less pressure to generate steady increases in net income, and high returns on equity.

If any of the PPACA CO-OPs do well, maybe they’ll generate the cash to start their own LTCI operations, or want to work with existing insurers to offer LTCI products.

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