Obamacare co-op Land of Lincoln loses money in first quarter

Crains Chicago Health Care Daily reports:

“Illinois’ only co-op health insurance program lost more than $4 million and enrolled fewer than 2,500 people in its first quarter of operation as it struggled to enter a market dominated by one massive competitor.

Land of Lincoln Health Inc. Co-op had just 2,451 members by March 31, 97 percent of whom bought individual plans. The carrier was established under President Barack Obama’s health care reform law and aimed to increase competition in Illinois’ individual and group insurance markets.

Meanwhile, the Chicago-based insurer recorded just $1.9 million in premium revenue against $6.1 million in expenses, including $1.6 million in payments for medical services and prescription drugs and $4.5 million in claims adjustment and administrative expenses, according to a filing last month with the National Association of Insurance Commissioners.

The figures, which include business on and off the state’s health insurance exchange, provide a first look into Land of Lincoln’s operations and suggest that Illinois’ newest health insurer has a ways to go before it can hope to challenge the likes of Blue Cross & Blue Shield of Illinois.

Though it is backed by federal loans, Land of Lincoln isn’t nearly as well capitalized as the state’s dominant carrier. It also can’t use the loan money for marketing, and its premiums are well above Blue Cross’ in virtually the entire state.

“They don’t have the advantages of Blue Cross, which has owned this state and has a national brand,” said Barbara Otto, CEO of Health and Disability Advocates, a Chicago nonprofit. “It’s very challenging in this environment.”

To be sure, the quarterly numbers don’t tell the whole story of the first Obamacare enrollment period, which started Oct. 1 and stretched for weeks beyond the end of March. Those who signed up near the end of the period April 19 had additional time to pay their first premiums. Land of Lincoln says that for the year to date, 3,600 people have enrolled.

But by any measure, the results stand in stark contrast to what Blue Cross registered. The mammoth carrier wrote $2.63 billion in health premiums in its fully insured business in Illinois for the quarter. Last month, Blue Cross said it signed up about 350,000 Illinois residents on- and off-exchange during the enrollment period, with about 80 percent having paid for coverage.


Despite the losses, Land of Lincoln says it is “in a strong financial position.”

“From inception, our vision has been to build a scalable, sustainable health insurance company that regardless of year one success is in a competitive position for long-term success,” spokeswoman Elizabeth Pedersen said in a statement.

Co-ops were included in the Affordable Care Act in 2009 after the “public option” — public health insurance plans that would have competed with private insurance — proved politically untenable.

The program aims to inject competition into markets for individual and group insurance where consumers have few choices. There are 23 co-ops operating in as many states.

As startups, the new carriers were always going to face an uphill battle without the brand recognition, financial brawn and actuarial experience of insurers already in the market. Simply organizing themselves into functioning businesses and selling plans on Oct. 1 was an achievement, according to a January brief published in Health Affairs, a health policy journal.


Counting only insurers for whom data was available, the total nationwide enrollment in individual plans as of March 31 was about 10.1 million, a 29 percent net increase over Dec. 31, according to a report published this week by the Kaiser Family Foundation.

Co-ops accounted for at least 185,000 enrollees in the period, said Cynthia Cox, a senior policy analyst at Menlo Park, California-based Kaiser and lead author of the paper. That figure, which includes only co-ops that have reported data to state insurance regulators, is about 8 percent of the growth in individual enrollment from December to March.

Because coverage usually begins on the first of each month, applicants would need to have signed up by about Feb. 15 for coverage to start March 1 and to be counted as enrolled March 31.

“The majority of signups occurred after mid-February, which means that these initial findings likely underrepresent the ultimate number of individual market enrollees,” the Kaiser paper states.

The federal government awarded about $2 billion in loans to co-ops. Land of Lincoln received$160 million in low- and no-interest loans in 2012 to fund startup costs and ensure its solvency.

The insurer has said it intends to sell plans during the next enrollment period, which starts Nov. 15.”