A Maine nonprofit health insurance co-op established under the Affordable Care Act was the only one of its kind in the country to earn a profit last year, a government audit shows. Others are awash in red ink and many have fallen short of their sign-up goals.

Formed in 2013 under President Obama’s signature health care law, the co-ops were provided with $2.4 billion in taxpayer loans to get off the ground. Last year, only one of the 23 co-ops – Maine Community Health Options – made money, said the report released Thursday.

“We hit all the right notes from the very beginning,” said Kevin Lewis, CEO of Lewiston-based Community Health Options. The Maine co-op has captured about 80 percent of the Affordable Care Act’s 75,000 people in the state’s individual insurance market, and has been so successful that it expanded into New Hampshire in 2015.

But it is an exception, according to the federal audit.

For instance, the Iowa/Nebraska co-op was shut down by regulators because of financial concerns.

The Department of Health and Human Services’ inspector general’s office also found that 13 of the 23 lagged far behind their 2014 enrollment projections.


The audit raised concerns about whether federal loans will be repaid, and recommended closer supervision by the administration as well as clear standards for recalling loans if a co-op is no longer viable. Last week, the Louisiana Health Cooperative announced that it would cease offering coverage next year, saying it’s “not growing enough to maintain a healthy future.” About 16,000 people are covered by that co-op.

“The low enrollments and net losses might limit the ability of some co-ops to repay startup and solvency loans, and to remain viable and sustainable,” says the audit report.

Although the audit goes only through the end of 2014, problems apparently have persisted this year. A preliminary review of 2015 data by government officials shows that enrollments have increased but co-ops continue to report financial losses.

Lewis said that co-ops were never expected to be an immediate success, and that entering insurance markets is a monumental task, even for for-profit insurance companies that can access private money.

Community Health Options was granted a $65 million federal loan in advance of starting operations in time for the Affordable Care Act’s launch.

“We were always expected to be given a long runway, to give us time to take off and reach cruising altitude,” Lewis said.


In Maine, the co-op was competing against one other insurer – Anthem – when the health insurance marketplace began in 2014. In some other states, many insurance companies were battling for market share.

Lewis said another factor is that, in some states, insurance companies were “aggressively low-balling” to win market share. In Maine, Anthem and Community Health Options offered plans at similar prices.

Officially called Consumer Operated and Oriented Plans, nonprofit co-ops were a compromise after liberals were unable to achieve their goal of using the 2009-10 health care debate to create a government-run insurance program to compete against corporate insurers.

As recently as this spring, the White House touted co-ops as an accomplishment.

“In states throughout the country, co-ops have competed effectively with established issuers and attracted significant enrollment,” said a report by the president’s Domestic Policy Council on the fifth anniversary of the health care law.

The audit paints a very different picture. Among its findings:


 Maine’s was the only co-op in the black for 2014, with $5.9 million in net income. Losses ranged from a high of $50.4 million, for Kentucky’s co-op, to $3.5 million, for Montana’s.

Most of the co-ops had projected losses for 2014, but their actual losses tended to be higher. Illinois had projected $28 million in income and instead came in with a loss of $17.7 million. New York, the leader in enrollment, had a $35 million loss.

Thirteen co-ops fell far short of their enrollment projections, and nine met or exceeded them. New York enrolled 155,400 people, more than five times what it had projected. But co-ops in Arizona, Illinois and Massachusetts hit only 4 percent of their enrollment targets.

Low enrollment and medical-claims expenses that exceeded the income from premiums contributed to the losses. Nineteen co-ops had medical claims that exceeded premiums. The reasons included higher-than-expected enrollment of people with expensive health problems, lower-than-expected enrollment of younger people, and inaccurate pricing of premiums.

In a written response to the audit, Medicare chief Andy Slavitt said the administration agrees with the findings as well as the recommendations for closer oversight and clearer standards. He also offered a defense of the co-ops, saying they don’t have an easy job.

“The co-ops enter the health insurance market with a number of challenges, (from) building a provider network to pricing premiums that will sustain the business for the long term,” Slavitt said. “As with any new set of business ventures, it is expected that some co-ops will be more successful than others.”

The administration “takes its responsibility to oversee the co-op program seriously,” he said.

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