New health co-ops: Are they right for your clients?

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When the Affordable Care Act was passed in 2010, it called for the establishment of Consumer Oriented and Operated Plans (co-ops), which were meant to boost competition and offer competitive health plans for individuals and small groups. Today, there are 24 of these nonprofit health insurance agencies operating in the US, offering a wide scale of benefits for comparatively low premiums.

However, is choosing a subsidized plan through a health co-op the best choice for producers looking to help clients navigate the turbulent waters of the ACA exchanges?

For Jason Montrie, vice president of channel and network development for Land of Lincoln—Illinois’ co-op—the answer is simple.

“Profit is not the sole motivator for us,” Montrie said. “We have a deep connection to the community, and to the producer community. Our health plan is easy to understand, easy to choose and easy to use.”

Land of Lincoln offers more than 40 different plans for producers and clients to choose from, which include simplified policy language as well as lower premiums and lower deductibles. This overall lower cost is what makes co-ops stand apart from standard health insurers, Montrie said.

“What we continue to hear is that people want to have an insurance plan they aren’t afraid to use,” he explained. “We view that in the lens of total cost—not just the monthly cost of coverage, but also the cost of the annual deductible.”

By choosing these plans, Montrie believes producers will solidify themselves as a trustworthy resource, having chosen an individual or small group plan that focuses on customer service, simple policy language and overall affordability.

Dan Heffley, who serves as special master of legislation with the National Association of Health Underwriters, has a somewhat more measured view of the matter, however.

While acknowledging that health co-ops offer quality solutions for clients, Heffley is concerned with co-ops’ ability to offer those preferable rates long-term.

“The advantage that they have is that they’re not subject to certain market drivers,” he said. “Here’s what I’ve experienced in my 23 years: those that have offered better benefits and less premium typically find they can’t support that. That [strategy] might work for Wal-Mart, but for health insurance—where people use the insurance—they’re going to experience some losses.”

Heffley said the co-op in Nevada has a particularly aggressive business plan, and is consistently coming in as the cheapest option in the state. However, he believes the rates will inevitably rise to match those of competing carriers, leaving insureds with a plan far more expensive than what they had planned on.

“Everything being equal, if it’s too good to be true, it usually is,” he said. “They might be attractive now, but down the road, they’re going to be very unattractive.”

Heffley did emphasize that in the era of healthcare reform, clients who choose a health co-op and see rates rise won’t be stuck with that carrier, but will be able to shop around for better rates. However, the hassle and inevitable disappointment may not be worth it for producers.

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