(Bloomberg) — In Maine, the insurer that has enrolled the most commercial public exchange plan customers isn’t WellPoint’s Anthem unit. The leader there is WellPoint’s only rival: Maine Community Health Options, a startup that didn’t exist three years ago.
The newcomer, funded primarily by taxpayer loans from the Consumer Operated and Oriented Plan (CO-OP) program, has won about 80 percent of the market so far in Maine’s new insurance exchange, exceeding its own expectations, said Kevin Lewis, the chief executive officer.
CO-OPs have also attained a large market share in New York, Iowa, Nebraska, Colorado, Kentucky, Wisconsin, South Carolina, Utah, Montana, Nevada and New Mexico, according to John Morrison, a board member and founding president of the CO-OPs’ trade group.
New York’s CO-OP, Health Republic Insurance of New York, is probably the largest in the country, with more than 50,000 members. It was second in market share to WellPoint’s Empire unit on the state’s exchange at the end of December, according to exchange data.
Federal authorities have approved plans by the CO-OPs in Montana, Massachusetts and Kentucky to expand into neighboring states — Idaho, New Hampshire and West Virginia – next year.
The CO-OP program is part of the Patient Protection and Affordable Care Act (PPACA) – Obamacare.
Drafters created the program in an effort to increase the level of competition health insurance markets dominated by one or two carriers. Carriers are supposed to be member-owned nonprofits that get the bulk of their revenue from selling coverage to individuals, small employers, or some mix of individuals and small employers.
The government provided $2.1 billion in startup loans.
About 16 percent of the loans are for the CO-OPs’ startup expenses, such as leasing office space and hiring staff, and must be repaid in five years. The rest is to be saved to meet state regulatory requirements for insurers’ financial reserves, and is due in 15 years.
Obamacare opponents predicted early on that the CO-OPs would fail, and that much of the startup loan money would be lost.
During the first PPACA commercial exchange plan open enrollment period, which started Oct. 1 and is set to end March 31, the 23 active CO-OPs have enrolled about 300,000 people.
The plans have attracted enrollees by combining low premiums with a certain homespun appeal, according to company executives.
“We’re doing really well,” Lewis said in a telephone interview. Taxpayers face “no risk whatsoever” that Maine Community will go under, he said. “A lot of those early, dire concerns just need to be re-examined.”
Kristin Binns, a spokeswoman for WellPoint, declined to comment on her company’s CO-OP competition.
To be sure, some of the new CO-OPs have had bumpy starts.
Insurance regulators in Vermont refused to grant a license to their state’s CO-OP.
Exchange enrollment system problems have kept CO-OPs in Maryland, Massachusetts and Oregon from hitting their enrollment targets.
Consumers are “finding their way to us off the exchange, fortunately,” Dawn Bonder, CEO of Oregon’s Health Republic Insurance, one of two CO-OPs in that state, said in a phone interview. She estimated the company has signed up only about 4 percent to 5 percent of its customers using Oregon’s exchange.
“We’re looking at 2015 as an opportunity to just do what we hoped to do in 2014 — but with a lot of experience under our belt,” she said.
CO-OPs in Michigan and Tennessee have grown relatively slowly because their premiums have been higher than competitors’ premiums, spokesmen for the companies said.
“2014 is preparation, really, for ’15,” David Eich, a spokesman for Consumers Mutual, the Michigan CO-OP, said in a telephone interview.
The CO-OPs that have grown the most quickly “emerged as price leaders,” and those CO-OPs were responsible for more than a third of the lowest-premium plans offered on the public exchanges, according to an October report by the consulting firm McKinsey & Co.
Health insurance is a tricky business, and PPACA has made it trickier than usual this year.
Over the decades, new insurers have often tried to win share in their early days by offering low rates, only to discover later that they have created large but unprofitable, unsustainable books of business.