States with co-op health plans have lower premiums

States with new member-owned CO-OP health plans as part of Obamacare have premiums that are more than 8 percent lower than states that don’t, a new study shows.

The Consumer Operated and Oriented Plans, with startup money loaned by the health care law, have zero or very few customers yet, given all the problems with the sign-up system. But they are going toe-to-toe with traditional insurers on the exchanges in 22 states, introducing new competition to insurance markets. And there’s some early evidence that they may be helping to lower costs.

An analysis commissioned by the National Alliance of State Health CO-Ops found that the average premium for the benchmark plan on which the Department of Health and Human Services bases subsidies is $318 in CO-OP states and $347 in the others, a difference of 8.4 percent.

The comparison, based on the premiums released by HHS the week before last ahead of the launch of the exchanges, doesn’t include data from three states — Kentucky, Hawaii and Massachusetts.

In announcing the exchange premiums, Secretary Kathleen Sebelius stressed that they came in lower in states where more insurers are competing.

CO-OPs aren’t the only new insurers operating on the exchanges. Some markets, including New York, attracted other new players, too. And the whole exchange system is designed to spur competition because plans are battling head-to-head for customers who will be able to compare apples-to-apples offerings — assuming the exchanges are able to work through their early technology woes.

But most plans offered on the exchanges have been crafted to meet the new Obamacare requirements by insurers that were already selling in those states. Where the CO-OPs are up and running, they bring new blood. And in some states, including Maine, the new CO-OPs are providing the sole alternative to a single insurance company that has essentially had a monopoly in the state.

The consumer-oriented plans, introduced during the health reform negotiations as a watered-down version of the public option, would have had a much broader presence if the program hadn’t been kneecapped in the fiscal cliff deal.

A provision in that deal blocked the feds from contracting with any CO-OPs that hadn’t already signed loan agreements with the government, and it came just one day after the Centers for Medicare & Medicaid Services had received more than 20 additional applications, some from organizations in major states, such as Florida, Texas and California.

Funded initially by $6 billion in the Affordable Care Act, the CO-OP effort already had been cut to $3.4 billion even before the fiscal cliff deal swept most of the remaining money off the table. But CMS already had contracted with 24 CO-OPs for about $2 billion in loans, which are unaffected, and was left with 10 percent of funds to administer the program.

One CO-OP that tried to launch in Vermont was rejected by the state insurance department in a controversy that involved conflicts of interest with at least one member of its board who stood to gain by doing business with the insurer. CMS subsequently kicked it out of the program and called in its loans.

A CO-OP in Ohio has been approved to sell insurance but not in time to offer plans on the exchange during the first open enrollment season, a National Alliance of State Health CO-Ops official said.