When the ACA passed in 2010 it included the creation of state based co-op’s. With very few choices in the marketplace 23 states created their own co-op giving a reprieve to consumers hoping to pay lower costs. Each of the co-op’s are start-up companies and are having to hedge their way in a market with several large carriers that have decades of market presence. Many of the co-ops have come in with lower costs to gain high enrollment for the first few years of opening the doors. A strategy that has worked against several co-op’s like Louisiana’s Health Cooperative (LAHC) which will be the third health co-op to close its doors just two years after inception.
Will this continue to domino or will the other co-op’s learn from Iowa’s CoOportunity Health and Louisiana’s Health Cooperative or is it too late? What were their major mistakes leading to the closing of their doors so quickly? Each co-op operates separately in its respective state and is not managed as a whole like major health carriers Cigna and Blue Cross Blue Shield who manage their business by state but operate under a larger conglomerate. Unfortunately this has allowed several of the cooperatives to be mismanaged with rotating CEO’s and interim CEO’s leading to mismanaged funds and ultimately the closing of Louisiana Health Cooperatives doors.
AM Best, the insurance rating company, reported the LAHC operating at a 198% loss, among the worst performing Obamacare nonprofits in the nation. So where did the $66M government funding go in the last 18 months? Perhaps we should check George Cromer and Terry Shilling’s pockets. Needless to say Louisiana’s Health Cooperative is the next to close its doors at the end of 2015, so who is next, or will mistakes be learned from?
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