The big health insurers have reported a full year of 2014 results, and they and the Patient Protection and Affordable Care Act (PPACA) public exchanges are nearly done with the second annual open enrollment period.
More than 1 million Americans have had PPACA exchange qualified health plan (QHP) coverage in place for at least a year.
Patients have used the QHP coverage to get care, and doctors and hospitals have sent bills to the QHP issuers.
Millions of more employers, workers, dependents and individual coverage buyers are using new, PPACA-compliant coverage purchased outside the public exchange system.
See also: View from PPACA World: Ken Fasola
So far, however, many players’ descriptions of what’s going on out in the new, PPACA-made health insurance world amount to, “Well, it’s big.”
Government officials’ and insurers’ reports on PPACA World have been notably lacking in specificity about matters such as how well fully PPACA-compliant plan enrollees are getting care, how well providers are getting paid, and how back-office exchange administration is going.
For a few more data points from rating analyst reports, Web broker surveys, and hospital and broker earnings reports, read on.
1. Cash is king
One of the most visible, concrete looks into the finances of a fully PPACA-compliant plan has occurred because of the failure of CoOportunity Health, a new, nonprofit, member-owned health insurer that was providing coverage for about 100,000 residents of Iowa and Nebraska.
CoOportunity was a Consumer Operated and Oriented Plan (CO-OP) carrier. The drafters of PPACA put funding for CO-OP startup loans in the act in effort to increase the level of competition in some states’ health insurance markets and to get health insurers’ to be more aggressive about keeping rates low.
Some have wondered whether the failure of CoOportunity was that the PPACA public exchange system might have lured many insurers into setting exchange QHP rates unsustainably low.
Deep Banerjee and other analysts at Standard & Poor’s Ratings Services have tried to answer that question, at least for the CO-OPs, in a new report on CO-OP finances.
The S&P analysts say that, as of Sept. 30, 2014, all but one of the 21 CO-OPs the analysts reviewed was reporting a net loss, with the size of the net losses ranging from 9 percent at Coordinated Health Mutual Inc. of Ohio, which had lost $4.6 million on $50 million of surplus and $129 million in federal startup funding, to 314 percent at Community Health Alliance Mutual Insurance Company of Tennessee, which had lost $8.5 million on $2.7 million in surplus and $73 million in startup funding.
One CO-OP, Maine Community Health Options, stood out from the pack by earning $11 million in net income on $31 million in surplus and $132 million in startup funding.
At that point, CoOportunity had lost $40 million on $75 million in surplus and $145 million in startup funding. Its net loss amounted to 53 percent of surplus.
A total of five CO-OPs had either positive net income or a net loss equal to less than 40 percent of its surplus.
Medical loss ratios, or ratios of claims to premiums, “were hopelessly high for several of the CO-OPs due to high medical services utilization by members, leaving very little to cover administrative costs,” the S&P analysts say.
Many new ventures lose money, but CO-OPs may have more trouble getting additional seed capital than other ventures, because PPACA rules prohibit for-profit health insurers from owning, controlling or buying CO-OPs.
In the near term, the analysts say, “Lack of adequate liquidity is more of a concern than negative earnings.”
CoOportunity had only 80 percent liquidity ratio, or ratio of available cash to short-term cash needs.
The S&P found a total of five CO-OPs with liquidity ratios under 120 percent. The others have higher liquidity ratios, and 14 have ratios over 200, suggesting that they have enough cash to meet any short-term need for cash, the analysts say.
PPACA drafters created a three-year reinsurance program and a three-year risk corridors underwriting margin buffer program that could help the CO-OPs in the short term, the analysts say.