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There’s not one reason why co-ops are failing; there are dozens Date: 03/17/16

By Adam Cancryn

In March 2014, I scored an interview with the chief executive of a new health insurer called Maine Community Health Options.

The interview wasn't much of a "get" by any standard. MCHO was a little-known health plan that sold coverage to customers on Maine's state exchange. But it was exciting to me for one reason: MCHO was a consumer-oriented and operated plan, part of the first generation of nonprofit health insurers created by the Affordable Care Act and funded by taxpayers.

The co-op program, which consisted of 23 startups, offered an alternative to buying coverage from the traditional big insurance companies. The individual co-ops would ideally be more community-focused, friendlier and more accessible to the average consumer, and maybe even cheaper.

Judging by MCHO, the co-op concept had broad appeal. The company enrolled nearly 80 percent of the Maine market, overtaking incumbent Anthem Health Plans of Maine.

Kevin Lewis, MCHO's chief executive, was understandably upbeat when we spoke. We talked about the positive long-term effect the co-ops could have on the health care system. Then toward the end, he said something that took on new meaning when I later was investigating the web of political, governmental and operational failures that led to a sudden collapse of more than half of the original 23 co-ops last year. "As soon as someone thinks that they've got it all figured out, it's a dangerous place to be in, because it's all going to change," Lewis said.

Things in the co-op world certainly did change, but it took me a while to notice. Iowa's CoOportunity Health failed in late 2014 due to financial issues, and soon afterward Standard & Poor's warned several other co-ops could face challenges too. After three more shut down, Trudy Lieberman at the Columbia Journalism Review wondered aloud about the co-op program's stability.

I made a note then to ask around. But what jolted me into action was the abrupt closure of New York's Health Republic. Like MCHO, Health Republic appeared to be among the best co-ops. Yet when I looked deeper, it became clear that more customers didn't equal more success. In fact, in many cases the co-ops had enrolled way too many people, and now they barely had enough funding to pay for the health care that those new customers needed.

By the time I finished the post-mortem on Health Republic, other co-ops had begun falling, sometimes two in the same day. The difficulty was less in connecting the dots, but in figuring out why all those dots were dropping off the map at the same time.

Photo: Jack Zalium via Flickr

The answers came from a combination of documents obtained through public records requests, interviews with everyone in and around the co-op program I could find, and hours of scanning through academic papers detailing obscure ACA provisions. I ended nearly every conversation the same: If you know anyone else who might want to talk about this, send them my way. Over the next few weeks, one source led to another source, who vouched for me to another source, until I had a network of co-op executives, current and former government officials and others in the co-op program's orbit.

One difficulty was that there was no single smoking gun. Twelve co-ops collapsed because political realities on both sides of the aisle clashed with good policymaking, and there wasn't enough expertise or attention paid to the program to fix it. Getting across the nuance of that was one of my biggest challenges: How do you explain the inner workings of complex programs that exist inside the already complicated ACA, and then weave it into a narrative that doesn't immediately put readers to sleep?

Ultimately, we decided to lay everything out at once, trusting that readers would stick with the story if our reporting was solid and the writing was clear. It was a gamble; no one wants to write 4,800 words and watch it fall flat. But my editors had full confidence we could pull it off. In round after round of edits, they emphasized finding the right balance between wonky exposition and compelling storytelling.

The resulting article, published on Nov. 11, served as a road map to the co-op program's challenges, but perhaps more important, also functions as a starting point. For every question I could answer, three new ones seemed to pop up.

There is plenty more to write about individual co-op failures, such as the differences in how hard individual state regulators fought to keep their respective co-ops open, whether the nonprofits charged with launching the co-ops were actually qualified and the oversight (or lack thereof) that occurred at all levels of government.

In December 2015, MCHO was back into the news. Following my interview with Lewis, the co-op’s success seemed to continue. (Joseph Burns wrote about MCHO’s success last summer on AHCJ’s Covering Health blog.) But by the end of last year, MCHO had halted sales. Claims had spiked and it couldn't afford to take on much more risk.

Why that happened and what's behind it is still a mystery. And maybe that's the beginning of a brand new co-op story.

Adam Cancryn (@adamcancryn) is a senior reporter covering financial services and insurance for S&P Global Market Intelligence, a financial news and data organization.