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CO-OPs see established players trying to squash them

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The organizers of the new, nonprofit, member-owned CO-OP plans say the big, established carriers seem to be worried enough to try to squash them.

Dominant carriers in some states seem to be using predatory pricing strategies to drive rates unrealistically low, and carriers in at least 12 states seem to be re-enrolling customers in coverage in ways that could distort the public exchange risk pool in 2014, according to the National Alliance of State Health CO-OPs.

NASHCO — the trade group for Consumer Operated and Oriented Plans — made those allegations in a written presentation included in a materials packet prepared for the summer meeting of the National Association of Insurance Commissioners.

Drafters of the Patient Protection and Affordable Care Act created the co-op program in an effort to increase the level of competition in the health insurance market. NASHCO now represents a total of 24 co-ops. Twenty-two of the CO-OPs have the licenses needed to start enrolling consumers in coverage Oct. 1, and the CO-OPs expect to spend an average of $1 million each on marketing in the first year and enroll an average of 15,000 to 40,000 people.

Most are expecting to sell individual coverage, and about 10 percent to 20 percent are expecting to sell Small Business Health Options Program coverage.

All but two CO-OPs expect to sell coverage statewide, and all but one expect to sell coverage through agents and brokers.

The plans have a total of about 200,000 providers in their networks.

The inspector general of the U.S. Department of Health and Human Services recently questioned how much private financial support the CO-OPs can attract, but NASHCO said that, thanks in part to a startup loan program created by PPACA, all CO-OPs will enter the market with risk-based capital more than 500 percent of the regulatory action level.

In the future, one regulatory issue may be “recognizing and fairly resolving [the] tension between narrower performance (and lower cost) networks and reasonable/affordable access,” NASHCO said.

Today, NASHCO said, one CO-OP regulatory concern is the criteria states and exchanges are using to govern when the insurers in the exchange market can change their rates.

In two states, for example, CO-OPs have seen rate methodology rules changed in ways that seemed to put the CO-OPs at a disadvantage, NASHCO said.

Brokers and carriers say they are trying to help customers deal with PPACA uncertainty by re-enrolling the customers in coverage this year, to lock in 2013 rates and features for 2014, but some of those customers might get better rates — and the new PPACA tax credits — if they waited to renew Jan. 1, NASHCO said.

“Failing to offer [early renewal] to some may be discrimination,” NASHCO added. “Early enrollment of preselected risk distorts the exchange risk pool.” 

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