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Nonprofit insurers struggle in new marketplaces

Wednesday - 4/2/2014, 11:00pm  ET

In this Wednesday, March 26, 2014 photo, Ken Voorhees examines a board for defects while building a stairway for a customer in Lisbon, Maine. Voorhees, who is self-employed, signed up for health insurance with Maine Health Community Options. The nonprofit cooperative is capturing about 80 percent of the customers in the state seeking coverage under the health care law. (AP Photo/Robert F. Bukaty)

SUSAN HAIGH
Associated Press

HARTFORD, Conn. (AP) -- A smorgasbord of options and lower prices for consumers were two of the chief selling points for President Barack Obama as he promoted his overhaul of the nation's health insurance industry, predicting Americans would see "competition in ways we haven't seen before." Companies were even started as a way to encourage innovation and competition, namely 23 consumer-run, co-op insurers created with the help of $2 billion in federal loans.

But rather than promote competition, the co-ops and smaller nonprofits in some states have languished behind major insurers, attracting in some cases minuscule shares of the market. While Obama celebrated an early projection this week of 7.1 million enrollees under the Affordable Care Act, it's too early to say whether the law ultimately will foster sufficient competition to keep premiums and deductibles affordable for consumers.

Many of the nonprofit insurers are startups and have faced challenges as they tried to attract customers, including: the computer problems that plagued many of the signup websites; plans that weren't priced to compete; and a failure to develop brand recognition, due in part to restrictions on advertising and lobbying that were a condition of the co-ops accepting the federal funding.

"Between no lobbying and no direct marketing, that's what you get," said Ken Lalime, CEO of HealthyCT, a co-op in Connecticut. "It's kind of tough to get your name out there and get exposure."

Like nonprofits in other states, HealthyCT watched in recent months as customers chose big-name insurers on the marketplaces created under the federal health care law. Before Monday's enrollment deadline, HealthyCT had 3 percent of signups in the state.

Just 5 percent of enrollees in Washington state's marketplace had chosen community nonprofit insurers by the end of February. In California, more than 95 percent of people signing up for coverage went with four major insurance companies rather than seven regional or community nonprofits. About 97 percent of Oregon's enrollees have selected plans offered by the larger insurers in the state while 3.3 percent chose the two co-ops. In New Mexico, an estimated two-thirds of those signing up selected one of three major insurers. And through February in North Dakota, where Blue Cross Blue Shield had 80 percent of the market before the law went into effect, just 516 people chose coverage offered by the nonprofit Medica.

"When you had the lion's share before, you're going to have the lion's share again," said Neil Scharpe, a service contract specialist with North Dakota Center for Persons with Disabilities, who coordinates enrollment outreach workers.

The federal government, which operates the insurance marketplaces for 36 states, has not released data on what type of insurers people enrolled with on those marketplaces, said Courtney Jenkins, a spokeswoman for the Centers for Medicare and Medicaid Services. In the absence of federal data, The Associated Press surveyed the status of nonprofit insurers in numerous states, primarily those running their own marketplaces, or exchanges. In some states, some of the larger insurers are also not-for-profit.

And while the federal government has loaned $2 billion to the 23 co-ops, officials are not expressing concern with their enrollment figures or their ability to repay the loans. Jenkins said her agency is encouraged so far but will be monitoring the co-ops' progress.

The struggles have been pronounced for the newly created co-ops, and some congressional Republicans have voiced concern about their long-term financial viability. HealthyCT, for example, only ran TV ads after it began bringing in money from premiums. Near the end of March, it had signed up about a quarter of its original, modest goal of 10,000 customers. The two major insurers on the state's exchange, including Anthem Blue Cross Blue Shield, had 97 percent of the market.

For Maryland's Evergreen Health Co-op, lackluster enrollment numbers -- about 650 people had signed up for coverage through early March -- were blamed on technical issues with the exchange's website. Until recently, the exchange failed to even give shoppers the actual costs of Evergreen's policies that included out-of-pocket expenses.

The slow starts prompted some smaller nonprofits to adjust their enrollment goals and change their business plans. HealthyCT is now selling insurance outside the state's marketplace to larger employers and hopes to educate the public about its patient-centric model of care in time for the next open enrollment in November. Evergreen changed gears to focus more on offering small group insurance plans rather than individual ones and enrollment picked up, said Dr. Peter Beilenson, its CEO and president.

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