Ninth cooperative formed under Affordable Care Act closing

AP News
Posted: Oct 22, 2015 5:40 PM

A South Carolina health insurer has become the ninth insurance cooperative formed nationwide under the Affordable Care Act to fold.

Consumers' Choice Health Insurance Co. said Thursday that it will not sell policies in 2016, a decision that will leave 67,000 individuals and business customers looking for new coverage.

Ray Farmer, director of the South Carolina Department of Insurance, said Consumers' Choice and state regulators reached a mutual decision to shut down the company's business. He said the company was in a "financially hazardous condition."

"I did not have the confidence that this company would be a viable entity throughout the entire year of 2016," Farmer said.

Consumers' Choice joins cooperatives in Tennessee, Kentucky and Colorado, among other states, that have shut down for next year, leaving some consumers on the health care overhaul's public insurance exchanges with fewer options.

Officially called Consumer Operated and Oriented Plans, these nonprofit co-ops were devised during the overhaul's creation in order to inject more competition into insurance markets. They were seen as a fallback option by liberals who wanted a government-run insurance program to compete with corporate insurers that control the market for commercial coverage in the United States.

The federal government provided more than $2 billion in taxpayer-financed loans to help seed the co-ops, and a total of 23 were created. A report released during the summer by the Health and Human Services department's inspector general's office said only that only one out of the 23 — the co-op in Maine— made money last year.

Consumers' Choice said it was hurt, in particular, by smaller-than-expected payments from a provision of the law designed to stabilize premiums while insurers built their business on the new public exchanges. Insurers who incurred higher-than-expected costs were supposed to get help from a program funded by other insurers that had lower-than-expected expenses.

But in 2014, the government collected only $362 million from insurers that did well. Meanwhile, companies with sicker-than-expected patients requested nearly $2.9 billion in payments to help cover their claims. The imbalance meant that insurers would get less than 13 percent of what they sought.

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That led to an "unavoidable outcome" for Consumers' Choice, CEO Jerry Burgess said in a statement.

Customers who have coverage through that company will keep it for the rest of this year, but they will have to find another plan once open enrollment for 2016 begins next month. Consumers' Choice said it was making the announcement now so customers could line up new coverage before then.

South Carolina's individual exchange will now have four insurers offering coverage instead of five. A separate exchange for small businesses will be down to two insurers.

Consumers' Choice covers about 40 percent of the 168,000 people who bought coverage on South Carolina's exchanges.


Smith reported from Columbia, South Carolina, and Murphy reported from Indianapolis. AP Writer Ricardo Alonso-Zaldivar contributed to this report from Washington, D.C.