DAVID GREENE, HOST:
Now one thing that's grown out of the Affordable Care Act is the number of health insurance companies out there. The law created 23 of them. The goal is to foster more competition in a market often dominated by the big insurance companies. The new health insurers are nonprofit, member-owned cooperatives. And while the enrollment numbers we just heard about seem like good news for these co-ops, it might not be enough to make them last.
Eric Whitney went to Montana where the state's co-op is doing well, so far.
ERIC WHITNEY, BYLINE: There are definitely people out there who are stoked about being able to buy their heath insurance through a co-op. Karl Sutton is one of those people.
How much snow do you think is on the ground?
KARL SUTTON: Eighteen inches? Two feet?
WHITNEY: Sutton lives in an incredibly scenic part of Montana just south of Glacier National Park; tall dark forests and taller mountains, blanketed white in early March.
SUTTON: Cold, I think it's like zero.
SUTTON: Maybe minus five with wind chill. It's cold.
WHITNEY: But inside Sutton's mobile greenhouse, there's spinach growing. He sells vegetables to nearby markets in Missoula and Kalispell.
SUTTON: This is just spinach we over-wintered. We're just eating it ourselves.
WHITNEY: Wow. Look at that.
SUTTON: It'll take off.
WHITNEY: Sutton understands co-ops because he works in one, a 10-year-old grower's co-op, with more than a million dollars a year in revenue. It's run by and for its members. Sutton wants that model for his health insurance company, too.
SUTTON: When you buy into a co-op, that entitles you to one vote in the decision making, and I think it's the one business model that actually aligns with our democracy.
WHITNEY: Sutton was eager to sign up with the new Montana Health CO-OP. He thinks if members own the company, they won't overuse health care, to save everyone money. He knows it's an unproven start-up.
SUTTON: I mean, there's a degree of concern, but, we might as well try, because if we don't have the membership then the health care co-op isn't going to succeed, so we got to start somewhere, and I'm willing to take that risk.
WHITNEY: A couple of hundred miles and several mountain ranges away, John Morrison has a comfy law office in Last Chance Gulch.
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WHITNEY: It's in the heart of Montana's capital city, Helena. Morrison was first president of the National Alliance of State Health Co-ops.
JOHN MORRISON: In some states co-ops are dominating the marketplace, with 80 percent of the enrollees going to the co-op.
WHITNEY: That's in Maine. Morrison says most co-ops are very happy with their enrollment numbers. Their rates are often the lowest available through an exchange.
MORRISON: The co-op states have 8.4 percent lower premiums on average than the non-co-op states, across the marketplace. So co-ops are creating that competition. They're keeping rates down in the states that they operating in.
WHITNEY: Not everybody thinks that lower prices in some states than others are directly tied to whether a state has a co-op option. Bob Laszewski, a health insurance consultant, says low prices in a company's first year don't mean much.
BOB LASZEWSKI: We haven't seen any claims yet, you know.
LASZEWSKI: Getting the premium in the health insurance business is the first part of the business, having enough premiums to pay the claims over a long period of time is the real test.
WHITNEY: The co-ops do have a financial cushion. Federal start-up loans of about $100 million each. That gives them several years to readjust prices to cover all the health care their members will need. It's likely a lot of their customers are people insurance companies avoided in the past - people who either couldn't afford insurance before the new health law subsidies, or were turned down because they were sick, says Laszewski.
LASZEWSKI: And these co-ops have to make it in this most problematic niche of all and they don't have the benefit of a company that's heavily diversified into many other parts of the business. And in particular, they're not in the large and medium-sized employer market, which is the bread and butter for these guys. They're not in the Medicare Advantage business, they're not in the Medigap business, they're not in the Medicare part D business. Those are the profitable businesses in the industry.
WHITNEY: Jerry Dworak, head of Montana's co-op, says there's enough margin in the new exchange market for his company to survive. He says he's especially happy with the number of customers he's been able to get in spite of Healthcare.gov simply not working for the first two months it was open.
JERRY DWORAK: Never in my wildest imagination, with the political capital that was involved in this thing, did I think you'd hit Healthcare.gov and it was blank. I never thought that was going to happen.
WHITNEY: But Montana's co-op has still managed to win about 40 percent of the new exchange market. Co-ops have 50 percent of the new market in Nebraska and Iowa, and 60 percent in Kentucky. Dworak attributes Montana's successes so far, in part, to tirelessly beating the bushes for customers.
DWORAK: It's grassroots. I mean one thing about Montana, what really plays is word of mouth. Is what one Montanan says to another one in a coffee shop.
WHITNEY: Dworak is so optimistic, he's planning to expand into Idaho next year - even though he knows it's going to be tough to carve out a successful niche in a brand new and volatile market.
For NPR News, I'm Eric Whitney.
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GREENE: And Eric's story is part of a partnership between NPR and Kaiser Health News.
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GREENE: It's MORNING EDITION from NPR News.