Community Health Options, the Maine-based health insurance cooperative, continued its financial recovery in the second quarter from a staggering $31 million loss in 2015.

On Wednesday, the insurer reported a net loss of $3.3 million in the second quarter, down from a loss of $8.4 million in the first quarter.

As of June 30, Community Health had $45.6 million remaining in reserves from premiums, borrowing, investments and other sources.

“The reported results through the first six months of 2016 are consistent with the plan we developed with our regulators,” Community Health spokesman Michael Gendreau said in an email. “We are well on target with our 2016 forecast and continue to deliver on efficiencies and operational successes that are central to our ongoing plan stability.”

A year after becoming the only health insurance cooperative in the country to make money, the Lewiston-based co-op posted a $31 million loss in 2015, prompting it to set aside another $43 million in reserves to cover potential losses in 2016. Managers said at the time that customers accessed more medical care than expected, and that soaring costs for things such as prescription medications contributed to the shortfall. The organization had paid about $117 million in claims in 2014 and $250 million in 2015.

The magnitude of the loss for the nonprofit became clear late last year and led to its decision to stop individual enrollments of new customers in December, weeks before the end of the enrollment period under the Affordable Care Act.


Financials for the first half of the year seem stable. Total revenue was $206.7 million, up from $158 million in the first half of 2015.

Total net assets were $146.4 million as of June 30, down from $167.6 million at the end of 2015. Total liabilities were $100.8 million as of June 30, down from $117.8 million at the end of 2015.

At the end of the second quarter, the insurer had a total of 77,031 members, down from 82,813 members at the end of the first quarter, and up from 74,981 members at the end of 2015. Most of its members are in Maine, and the others are in New Hampshire.

Cooperatives such as Community Health are intended to provide competition so that for-profit and established insurers don’t dominate the market.

Community Health was the only nonprofit cooperative insurer in the nation among those set up as part of the Affordable Care Act to post a profit in 2014, taking in $7 million more than expenses before it suffered a sharp turnaround in 2015.

In August, it sued the federal government, claiming it is owed $22.9 million to offset losses it suffered in 2015. The suit alleges that the government owes the co-op money under the temporary “risk corridors” program, which is designed to help insurers manage costs, profits and losses for the first few years of the ACA. Insurers that have lower-than-expected costs pay a portion of their profits into the program, while insurers that experience higher-than-anticipated costs receive payments to help offset their losses.


Community Health paid $2 million into the risk corridor program in 2014, when it had a profit of $7 million, but it has received nothing under the program for the costs it incurred in 2015, said Kevin Lewis, CEO of the cooperative. The $22.9 million it is seeking is based on its 2015 losses, not what it contributed to the risk corridors program in 2014.

While Community Health’s losses have fallen sharply over the past two quarters, there is still a chance that its financial situation could worsen in the second half of the year.

Eric Cioppa, superintendent of the Maine Bureau of Insurance, has said that Community Health is generally sticking to the financial plan it filed with the state early this year. But he also noted that seasonal changes can be dramatic. In 2015, the insurer reported a profit of nearly $23 million in the first quarter, and a profit of $1.9 million in the second quarter. Then losses began to accrue during the summer and accelerated as the year went on.

Cioppa ordered the co-op to stop writing policies late last year, concerned that losses in the market for individual policies could lead to a significantly higher deficit this year. He also sought to put the cooperative into receivership early this year, with its consent, intending to steer thousands of policyholders to other providers to reduce costs. But federal officials blocked the effort because the ACA guarantees that policies can be renewed annually.

Still, Bureau of Insurance spokesman Doug Dunbar said the bureau is not expecting a repeat of last year’s losses.

“We believe the company’s plan, with the bureau’s significant involvement and oversight, should make the substantial financial losses at the end of last year less likely,” Dunbar said via email.


The insurer also initiated $11 million in administrative cuts, which included voluntary pay cuts, to help it return to stability. Co-op managers have declined to disclose the specifics of those cuts aside from identifying broad categories of reduced salaries and scaled-back marketing.

The cooperative’s ability to control its finances is somewhat limited. Many of its customers come from the marketplaces set up under the ACA, and in many cases they have either never had health insurance or not had it for years. Once covered, they tend to have long-standing health problems that need to be addressed, leading to high costs for the insurer.

Insurers’ ability to react to that reality by raising rates is delayed. The insurers have to file rate requests with state authorities in May, and those new rates don’t go into effect until Jan. 1 of the following year.

Based on its successful debut in 2014 and a financially healthy start in 2015, Community Health Options filed for a rate increase of less than 1 percent last year – and those rates kicked in on Jan. 1. This year, it sought a rate increase of 25.5 percent for 2017, although for the majority of its customers, most of the hike will be offset by increased government subsidies. The requested rate increase was approved on Aug. 16.

Correction: This article was modified at 11:19 a.m. on Thursday, September 1, 2016 to reflect that the state Bureau of Insurance approved a 25.5 percent rate increase for Community Health Options members for 2017.

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