“The first year for Illinois’ only co-op health insurance program could be charitably termed as troubled. Established as part of Obamacare, Land of Lincoln Healthaimed to increase competition on the state’s new health insurance exchange, but high prices meant it captured just under 2 percent of enrollments.
As it starts its second year, enrollment is up significantly. But the company is still in a hole and the clock is ticking on when it must begin repaying up to $160 million infederal loans.
Land of Lincoln’s operating loss tripled to $11 million from March to September 2014, a window in which enrollment had for the most part ended. Feb. 15 is the deadline to enroll this year, and so far 30,000 people have chosen a Land of Lincoln plan, a nearly tenfold increase over last year.
“It’s a little too early to say they made a remarkable turnaround . . . but it’s a step in the right direction,” says Steve Riedl, a Chicago-based senior consulting actuary at Towers Watson.
The situation isn’t unique to Illinois. Almost all of the 23 federally backed co-ops created as part of the Obama administration’s health care overhaul are operating in the red, according to A.M. Best, an Oldwick, N.J.-based global credit rating agency that analyzes the insurance industry. The Iowa co-op is in the process of liquidating.
“I would say for a majority of the co-ops, 2015 is a make-or-break year,” says Sabrina Corlette, senior research fellow at Georgetown University’s Center on Health Insurance Reforms.
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Land of Lincoln’s first-year flop contrasted with the success of Blue Cross & Blue Shield of Illinois, the state’s dominant carrier. While Land of Lincoln offered on average some of the most expensive premiums on the exchange, Blue Cross offered some of the cheapest, and about 92 percent of 217,000 enrollees bought one of its plans. Land of Lincoln split the remaining members with four other carriers.
This year, the co-op slashed premiums up to 30 percent by creating new plans with Chicago and suburban hospitals that offer deeper discounts. Some of the largest hospital networks in the state, including Downers Grove-based Advocate Health Care and Chicago-based Presence Health, are participating.
“Clearly price and affordability is paramount to people,” Land of Lincoln President Jason Montrie says.
Statewide and in Cook County, the co-op this year is selling on average the second-cheapest silver plan for a 40-year-old based on the premium cost, according to an analysis by Chris Sloan, a manager at Avalere Health, a Washington, D.C.-based consultancy.
“That price with consumers is going to carry a lot of weight,” Riedl says.
Exchange plans are categorized by metal levels, with platinum and gold plans providing the most coverage and silver and bronze the least. Silver plans are the most popular, attracting 65 percent of enrollees nationwide last year, Sloan says.
Other insurers on the state exchange, called Get Covered Illinois, are cutting their prices to chip away at Blue Cross’ lead. The giant carrier offered the lowest-cost silver plan in just 20 counties this year, compared with 88 last year, according to the Illinois Department of Insurance (see their PDF report).
There also are more insurers competing on the exchange this year. Land of Lincoln estimates that it has a roughly 10 percent share of the exchange—a bigger piece of an expanding pie. Last year, six carriers sold a combined 165 plans. This year, eight companies are offering more than 400 plans.
Blue Cross spokeswoman Lauren Perlstein declines to provide current enrollment figures. In an email, she says the number of sign-ups is “in line with what we expected.”
The co-ops aren’t getting any more federal money. And most have to start paying back their loans within the next few years, Corlette says. Land of Lincoln has three years before it has to start paying down a $15.9 million loan it used to build its infrastructure. Land of Lincoln has reduced its spending on marketing as it becomes better known in the marketplace. It spent $2.5 million on education and outreach in 2014 and $1.4 million for this year’s enrollment period.
Dr. Martin Hickey, the Albuquerque, N.M.-based chairman of the National Alliance of State Health Co-ops board, paints a rosier picture. “It’s too early to judge” the financial performance of co-ops, he says. The current enrollment period isn’t over yet, and most co-ops planned to operate at a loss their first three years in business, he says.
Montrie says Land of Lincoln likely will expand its offerings, including more deep-discount plans. The insurer has sold 7,000 plans off the exchange to consumers and businesses. That includes to large businesses as of Jan. 1, which will generate revenue even when enrollment in the Obamacare exchange is closed.
“We feel very good about where we’re at and where we’re headed,” Montrie says.