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July 27, 2015 at 12:02 PM
The leaders of the Louisiana Health Cooperative Inc. (LAHC), a health insurer, have decided to wind down the company’s operations.
LAHC will honor all policies, but it will not participate in the 2016 open enrollment period, according to Greg Cromer, the chief executive officer.
The founders of LAHC organized it using a provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) that promoted the creation of nonprofit, member-owned health insurance companies.
PPACA provided startup funding for the Consumer Operated and Oriented Plan (CO-OP) insurers, but Congress later reduced the amount of program funding available. The PPACA CO-OP statutes forbid managers from getting financial help from traditional health insurers, selling the plans, or selling stock to the public.
A CO-OP that operated in Iowa and Nebraska, CoOportunity Health, failed in late 2014. Organizers said the plan ran into problems because of a combination of rapid enrollment growth, unexpectedly high medical claims, and the slow startup of PPACA risk-management programs that were supposed to provide cash.
The CO-OP in Kentucky also grew rapidly, and it has announced plans to sit out the 2016 open enrollment period in its state.
Investigators at the U.S. Government Accountability Office (GAO) have said that CO-OP capitalization levels appear to vary widely. Deep Bannerjee, an analyst at Standard & Poor’s Ratings Services, suggests in a new commentary that most of the CO-OPs lost money during the first three quarters of 2014, in part because claims were higher than expected, and that the program rules limit the CO-OPs’ ability to get capital from private sources.
