Nonprofits in 25 states have received over $2 billion in federal loans to essentially start new health insurance products from scratch. And the health care observers I talk to think that these plans have the potential to upend the health insurance market — or end up as the next Solyndra.
While insurers have typically tried to lure in the healthiest subscribers, who would file the fewest claims, co-ops generally seek out the riskier, sicker people. They have a good reason: The health care law includes something called risk adjustment, which requires the health plans with super healthy subscribers to transfer some funds to those that have really sick customers, in other words, the plans that the co-ops might use.
If co-ops do focus on the least healthy customers and aren’t able to get their health costs down, that leaves them with very significant medical claims to cover.
Now that we’re three weeks out from the marketplaces launch, co-ops have their strategies locked into place. And we’re about to learn whether their strategy is a big hit, or headed for big trouble.