Health Insurance Startup Collapses In Iowa

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By Clay Masters, Iowa Public RadioWed, Jan 14 2015
It was a heck of a Christmas for David Fairchild and his wife, Clara Peterson. They found out they were about to lose their new health insurance.
“Clara was listening to the news on Iowa Public Radio and that’s how we found out,†Fairchild says. They went to their health plan’s website that night. “No information. We still haven’t gotten a letter about it from them.â€
The two are the sole employees of a cleaning service and work nights. Fairchild has chronic leukemia but treats it with expensive medicine. Last year they saved hundreds of dollars switching from the insurer Wellmark to a plan run by CoOportunity Health. For the first time in a long time, Fairchild says, they felt like they had room to breathe.
“Basically it covered our office visits; covered exams,†he says. “It covered all but $40 of the medicine every four weeks. It was just marvelous. It probably was too good to be true.â€
It was for them. CoOportunity Health has failed. The Affordable Care Act set aside funding for health care co-ops, to enable the organizations to compete in places where there aren’t many insurers. CoOportunity Health was the second largest co-op in the country in terms of membership, and one of the largest in terms of the federal funding*it received.
But then CoOportunity hit a kind of perfect storm, says Peter Damiano, director of the University of Iowa’s public policy center. First, the co-op had to pay a lot more medical bills than those in charge expected.
“CoOportunity Health’s pool of people was larger than expected, was sicker than expected,†Damiano says. “So their risk became much greater than the funds that were available,â€
The reason the co-op’s customers were sicker has a lot to do with what the insurance market looked like in Iowa before Obamacare. The largest insurer by far in the state was and still is Wellmark. But Wellmark decided not to offer any plans on Iowa’s health exchange, leaving just CoOportunity and one other insurer — Coventry — offering plans on the exchange throughout the state.