LINDA WERTHEIMER, HOST:
Thousands of Americans are searching for a new health insurance company because their current provider is going out of business. Health insurance cooperatives set up as part of Obamacare are folding in a dozen states. In a moment, we'll hear from Connecticut where the co-op has survived. But first, Colorado Public Radio's John Daley reports on the demise of that state's co-op insurer.
JOHN DALEY, BYLINE: In their home in Centennial, Rick and Letha Heitman read a four-page summary of new health plans.
LETHA HEITMAN: So here's the paperwork I picked up today from the broker.
DALEY: They're customers of the Colorado HealthOP. They say the co-op proved to be a life saver when Rick was diagnosed with an aggressive prostate cancer last spring.
RICK HEITMAN: I owe them for taking care of me. They helped me at a time when I needed it a lot.
DALEY: Now they have another help hurdle on their hands. Last month, they learned Colorado HealthOP is folding, and they're shopping for insurance all over again. HealthOP CEO, Julia Hutchins, says the co-op got walloped by the equivalent of a fast-moving tornado after the federal government said it wouldn't be paying co-ops millions in subsidies they'd expected.
JULIA HUTCHINS: So we were really blindsided by that. We felt like we'd done our part in helping serve individuals who really needed insurance, and now we're the one left holding the bag.
DALEY: Colorado HealthOP is one of 23 nationally that opened after Obamacare. The startups were supposed to save money by being member-owned and nonprofit. But it was tough to figure out how much to charge. A lot of co-ops priced their plans low and the sign-ups poured in. But these new customers had high health costs. It wasn't adding up.
LINDA GORMAN: As a business, you shouldn't go into business counting on federal subsidies.
DALEY: That's Linda Gorman with the Independence Institute, a Colorado think tank. She says the new co-ops were in over their heads.
GORMAN: The notion that you should just beat up on for-profit entities and then form these nonprofits and everything will be magically OK is unfortunate to begin with. And we've wasted 2 to 3 billion dollars on subsidies for these co-ops.
DALEY: But the HealthOP's senior IT manager, Helen Hadji, a Republican, blames conservatives in Congress for not spending the money needed to keep the cooperatives afloat.
HELEN HADJI: This is a federal failure. This is all a political battle to dismantle Obamacare.
DALEY: Colorado's co-op captured 40 percent of the individual market on the state's exchange. Now 80,000 customers like Rick and Letha Heitman are hunting for new insurance. For the Heitmans, it will cost more. They paid about $500 a month last year. Next year, it could be double or triple that.
L.HEITMAN: You know, that's a big owie (ph).
DALEY: But it's the price they'll pay to keep Rick with the doctors who are treating his cancer. For NPR News, I'm John Daley in Denver.
JEFF COHEN, BYLINE: And I'm Jeff Cohen in Connecticut where the opposite story's playing out. If Colorado saw an early surge in membership because of low prices, Connecticut's co-op nearly priced itself out of the market in its first year. With rates much higher than its competitors, HealthyCT only got 3 percent of the state's business under the Affordable Care Act. Ken Lalime runs the co-op.
KEN LALIME: In that first year, also, the reason we had such low market share is that consumers new to insurance - most of those individuals bought on price.
COHEN: He says starting it was hard.
LALIME: You know, nobody's built a new insurance company in the state of Connecticut in 30 years. There's no book that you pull off the shelf and say, you know, let's go do this.
COHEN: Lalime faced the same problem as insurers across the country. He didn't know who his customers would be, he didn't know whether they'd be sick or healthy and he didn't know how much to charge. But the slow ramp up actually helped. He didn't have a huge number of claims to pay right out of the gate.
LALIME: Hindsight, that didn't hurt us to be able to take it slowly.
COHEN: In year two, he had more competitive average premiums and his company went from 3 percent of the market share to 18 percent. But for 2016, the co-op wavered on its premiums and state regulators eventually told HealthyCT where to land, and it was higher than its final ask. Paul Lombardo is an actuary for the state, and he says that's an indicator that setting premiums is still a gamble.
PAUL LOMBARDO: There wasn't a lot of data to say, OK, we can use 2014 experience to project forward.
COHEN: For now at least, Lombardo says HealthyCT is holding its own.
LOMBARDO: They're in good standing, and we look to have them go through the full year as any of our other health plans do in 2016.
COHEN: Enrollment for health insurance goes until January 31 with just 11 of the original 23 co-ops still in business. For NPR News, I'm Jeff Cohen in Hartford.
WERTHEIMER: This story is part of a reporting partnership with NPR, Colorado Public Radio, WNPR and Kaiser Health News.
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