Lewiston-based health insurance cooperative Community Health Options has experienced two consecutive months of solid financial performance following a $31 million loss in 2015, according to a report issued Monday.

The state Bureau of Insurance released its second report on Community Health’s finances since placing it under what the bureau calls “enhanced oversight.” Triggered by the significant financial loss, it means the cooperative is now required to communicate with regulators more frequently about its finances and activities.

The bureau reported Monday that the cost of Community Health’s member claims was consistent with its financial plan for 2016, while net income exceeded the amount specified in the plan.

Its net cash from operations as of Feb. 29 also was better than expected, according to the bureau.

“It’s certainly good. There’s no question about it,” bureau Superintendent Eric Cioppa said about the report, though he noted that the “uncertainty and variability” of claims can change an insurer’s financial performance dramatically from month to month. “It’s so difficult to predict.”

Community Health has more than 84,000 policyholders in Maine and New Hampshire. It is one of about two dozen insurance cooperatives nationwide to start up under the Affordable Care Act. They were intended to take a slice of the insurance markets created by the act and provide competition to for-profit insurers.

However, many cooperatives underestimated the pent-up demand for medical services among newly insured and thus set their rates too low, Cioppa said. To date, about half of the initial crop of cooperatives has folded.

He said the cooperative plans to request a rate increase this summer for 2017 that would help offset the risk of future losses from another unexpected spike in claims.

Community Health reported cash investments of $75.2 million at the end of February, down slightly from $76.4 million two months earlier. Its total membership as of Feb. 29 was 1.2 percent lower than projected.

Community Health CEO Kevin Lewis said the two consecutive months of improvement to the cooperative’s bottom line are a testament to its wide-ranging efforts to reduce costs and boost efficiencies.

“We continue to maximize every premium dollar,” Lewis said. “We’re extremely bullish about 2016 and beyond.”

Community Health was the only cooperative in the nation to generate a cash surplus in 2014, its first year of operation. But a year later, it posted the $31 million loss for 2015 and announced it would set aside $43 million in reserves to cover potential losses this year.

The magnitude of the nonprofit’s losses led to a decision to stop individual enrollments of new customers in December, weeks before the end of the enrollment period under the Affordable Care Act.

Community Health also cut $11 million in administrative costs at the end of 2015, although Lewis has declined to detail all of the specific steps taken.

Lewis acknowledged that two months of better-than-expected performance do not guarantee the cooperative will avoid financial trouble in the future if the cost of claims rises unexpectedly.

“Certainly, this (industry) isn’t for the faint of heart,” he said.

A follow-up report will be issued by the insurance bureau in early May that covers the co-op’s March performance, followed by similar monthly reports throughout the year.

 

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