Newspaper article St Louis Post-Dispatch (MO)

Why Land of Lincoln and Other Health Insurance Co-Ops Failed

Newspaper article St Louis Post-Dispatch (MO)

Why Land of Lincoln and Other Health Insurance Co-Ops Failed

Article excerpt

Failures among member-run health insurance co-ops are forcing thousands of consumers to find new health insurance coverage, while renewing questions about the viability of a once-promising program created by the Affordable Care Act.

In Illinois, about 49,000 people must find coverage after state regulators last week ordered Land of Lincoln Mutual Health Insurance Co. to close in the face of steep losses.

For those consumers, enrolling in new plans mid-year means restarting deductibles and out-of-pocket maximums, and potentially losing access to current doctors a predicament that the Illinois Department of Insurance acknowledged late last month could cause "extreme financial harm."

Land of Lincoln's troubles mirrored those of other insurance co- ops created under President Barack Obama's signature health reform law. These consumer operated and oriented plans were conceived as an alternative to commercial insurance. Set up as nonprofits and seeded with federal loans, the co-ops were supposed to spur competition from companies with a strong consumer focus.

But many struggled early. Either they increased enrollments too fast, and then could not keep up with rising health costs, or they could not gain enough members to help spread their costs. Others, including Land of Lincoln, were doomed by shortfalls in anticipated federal funding, as well as rules that required them to make huge payments to competitors.

A year ago there were more than 20 co-ops across the U.S., providing coverage to about 1 million Americans. By this fall, after the co-ops in Illinois, Oregon, Ohio and Connecticut close, there will be just seven, covering about 350,000 people.

Lori Strumpf, co-owner of R&M Oil in Columbia, Ill., said she liked Land of Lincoln's premium price, which was about $1,300 per month for family coverage with a $500 deductible per individual, a $3,350 out-of-pocket maximum and access to a wide range of providers.

But when claims weren't being resolved in a timely fashion, she knew something was wrong. Her children's pediatrician still hasn't been paid for a visit in August 2015, and his office has threatened to send the bill to collection. Her employees R&M has 15 reported similar problems, she said.

Land of Lincoln's price may have been right, but "cheap isn't always good" when it comes to health insurance, Strumpf said.

Joe Colyer, a broker with Working Class Benefits in Granite City and Strumpf's agent, said Land of Lincoln offered health plans for small employers and individuals that were priced competitively and had large networks in the Metro East. His firm helped enroll hundreds of individuals into these plans for coverage in 2015. But toward the end of the year, his firm started receiving complaints about Land of Lincoln not paying providers and because of that doctors started dropping out of its networks.

"Whenever we were reaching out to the carrier to resolve things ourselves, we were getting terrible wait times and response times," Colyer said. "They don't have the administration to handle the volume that they were price-pointed for at the beginning of the year."

Going into 2016, Colyer said his firm started to reduce its offerings for Land of Lincoln plans.

DAUNTING CHALLENGES

Land of Lincoln was founded by an organization that represented Illinois' 150 hospitals, the Metropolitan Chicago Healthcare Council. …

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