Louisiana ACA CO-OP To Close

The leaders of the Louisiana Health Cooperative Inc. (LAHC), a health insurer, have decided to wind down the company's operations.

LAHC will honor all policies, but it will not participate in the 2016 open enrollment period, according to Greg Cromer, the chief executive officer.

The founders of LAHC organized it using a provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) that promoted the creation of nonprofit, member-owned health insurance companies.

PPACA provided startup funding for the Consumer Operated and Oriented Plan (CO-OP) insurers, but Congress later reduced the amount of program funding available. The PPACA CO-OP statutes forbid managers from getting financial help from traditional health insurers, selling the plans, or selling stock to the public.

A CO-OP that operated in Iowa and Nebraska, CoOportunity Health, failed in late 2014. Organizers said the plan ran into problems because of a combination of rapid enrollment growth, unexpectedly high medical claims, and the slow startup of PPACA risk-management programs that were supposed to provide cash.

The CO-OP in Kentucky also grew rapidly, and it has announced plans to sit out the 2016 open enrollment period in its state.

Investigators at the U.S. Government Accountability Office (GAO) have said that CO-OP capitalization levels appear to vary widely. Deep Bannerjee, an analyst at Standard & Poor's Ratings Services, suggests in a new commentary that most of the CO-OPs lost money during the first three quarters of 2014, in part because claims were higher than expected, and that the program rules limit the CO-OPs' ability to get capital from private sources.

The Louisiana CO-OP now has about 16,000 enrollees.

"LAHC has sustained itself over the last few years, but is not growing enough to maintain a healthy future," Cromer said in a statement about the decision to wind down the company's operations. "By proactively and voluntarily addressing our situation now, LAHC will be in a position to maintain all of its policies in force through the end of the year, and to cover all outstanding claims and operating expenses."

LAHC has capital to pay its staff, pay providers and meet all other obligations, Cromer said.

LAHC is working with state and federal deadlines to meet all enrollment period-related deadlines and make the process of helping enrollees arrange for other coverage as seamless as possible, Cromer said.

B. Ronnell Nolan, president of Health Agents for America, said in a HAFA newsletter that Cromer has told her that LAHC will make good on compensation agreements with agents and brokers.