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December 10, 2015

Community Health Options puts freeze on new individual insurance sign-ups

File photo / Tim Greenway Kevin Lewis, CEO of Community Health Options, left, and Robert Hillman, COO, in the nonprofit health insurer's headquarters within Lewiston's historic Bates Mill complex.

Community Health Options, the Lewiston-based nonprofit health insurance co-op, announced Wednesday that it will suspend sales of new individual insurance plans for 2016 before the end of the year.

The decision does not limit or affect Community Health Options’ group business, and the company will continue to enroll new and returning group business in 2016 with renewals and new enrollment throughout the year.

“Dec. 26, 2015, will be the last day to purchase an individual Community Health Options plan through the online Marketplace and Dec. 15, 2015, will be the last day to purchase an individual plan directly from Community Health Options,” the company stated on its website.

The announcement is clearly a speed bump for a company that as recently as July was held up in a federal Department of Health and Human Services’ report as the only one of 23 consumer-operated and -oriented health insurance companies created under the Affordable Care Act that was profitable in 2014, posting a net income of $5.9 million. The company far exceeded its own expectations in signing up people using Maine’s federal health insurance exchange, capturing more than 80% of Maine’s Marketplace business. It also expanded into New Hampshire and now covers more than 70,000 members in the two states.

Community Health Options CEO Kevin Lewis told Mainebiz the company’s third quarter loss was $17.3 million.

“This deficit is explained by claims costs running higher than expected and particularly observed in the individual market … most of the impact is where the vast majority of the premium dollars are spent: medical and pharmacy claims,” he said. “Our significant growth over the last two years coupled with higher-than-expected claims led to the curtailment of additional new enrollment in the last few weeks of open enrollment in the individual market.”

Lewis said the company is continuing with new enrollment within the group market “on the strength of its lower loss ratios.”

Other steps taken to curb costs, he said, include trimming administrative expenses, initiating a hiring freeze, cutting the pay of C-level executives “while preserving the pay of the rest of our team.”

'Proactive' response

In a telephone interview with Mainebiz on Wednesday afternoon, Maine Bureau of Insurance Superintendent Eric Cioppa characterized the co-op’s decision to stop taking on new individual members before the end of the year as a “proactive” step to ensure the nonprofit company stays financially healthy going forward.

“We’re still working with the company on its 2016 business plan,” Cioppa said. “It’s a very tough environment, not only for them but for all health insurers at this time.”

Cioppa said he had approved CHO’s plan and was working closely with the Lewiston company, the federal Centers for Medicare and Medicaid Services and the New Hampshire Insurance Department (since the co-op also does business in New Hampshire) “to support CHO’s financial commitment and its communications with policyholders and other stakeholders.”

“Community Health Options is continuing to meet all of its obligations in the normal course of business,” Cioppa said.

In a separate statement posted on its website, the Maine Bureau of Insurance said the company’s decision to freeze its enrollment of new individual customers later this month represents an effort to consolidate its gains as a new insurance startup before expanding further in the individual market.

“With more than 80% of the individual market in Maine, the company’s first priority is to its existing customers,” the bureau stated.

Cioppa said CHO faces “a very difficult challenge” in setting competitive premium rates while only having two years or less of claims data for its various members.

The Affordable Care Act requires nonprofit insurance co-ops to pay into a “risk corridor” adjustment fund set up by the federal government if the companies are profitable, as Community Health Options was in 2014.

In theory, health insurance co-ops with healthier-than-average enrollees would pay into the fund to help companies with sicker-than-average enrollees cover their losses.

But that provision, which was to run for the federal health care law’s first three years, hasn’t delivered on that premise, in part because a provision that Sen. Marco Rubio placed in last year’s federal spending law limits how much the federal government can spend to cover the co-op insurance companies’ financial losses.

In fact, the risk fund is paying slightly under 13% of what co-ops were expecting to receive this year for their losses, Cioppa said.

An Oregon insurance co-op, one of 12 of the 23 nonprofit insurance cooperatives created by the ACA that have since failed, explicitly cited the federal government’s failure to fully fund the risk corridor provision as a factor in its October decision to close.

While acknowledging the federal government hasn’t fully delivered on a provision originally designed to mitigate risk for the new co-ops during the first three years of the ACA’s federal Marketplace, Lewis said it wasn’t a factor in the company’s decision to freeze its new individual enrollments at the end of this year.

“We have never put any stock into the risk corridors relief and never factored that into our pricing,” he said.

Cioppa said individuals with a 2015 CHO plan are guaranteed renewal of their plan for 2016, adding that the company’s premium rates for individual plans, which were approved by the Maine Bureau of Insurance earlier this year, will not change. In 2016, CHO’s individual rates will increase by 0.5% and for small groups by just under 4%.

This fall, Mainebiz named Lewis and Robert Hillman, the company’s chief operating officer, to its 2015 NEXT List honoring Maine business leaders who are shaping the state’s economy in innovative and positive ways.

Read more

State, feds at odds over how to address Community Health Options' financial woes

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