Short Takes On News & Events

Rocky Opening Leaves Health Law’s New Co-Ops Jittery

By Jay Hancock

October 15th, 2013, 3:42 PM

Nothing is more important for a startup burning through cash than winning customers and revenue.

So problems with the Affordable Care Act’s online marketplaces, also known as exchanges, aren’t just an inconvenience for the likes of Evergreen Health Co-op. They’re a threat.

Photo by Aaron Sumner via Flickr

“It’s slowly getting better. Some people have gotten to the enrollment stage before the site freezes,” says Evergreen’s frustrated CEO, Dr. Peter Beilenson. “Once enrollments start occurring, we still don’t expect to get notification of that from the exchange until December, which makes planning for deployment of resources challenging.”

Maryland-based Evergreen is one of nearly two dozen nonprofit insurers created by the health law. Called co-ops because they will be owned by the policy holders, they’re supposed to add competition and lower medical-coverage prices.

But they can’t do either if customers don’t know they exist. Maryland’s insurance portal, intended to let shoppers compare plans and buy coverage, barely worked the first few days after it opened Oct. 1. When it did, it left Evergreen off the list of options, Beilenson said.

That got fixed. But even Maryland Gov. Martin O’Malley, an enthusiastic supporter of the health law, says system flaws will take another month or six weeks to iron out.

Meanwhile Evergreen is paying staff, renting offices and hiring doctors and has only until March under the health law’s open enrollment period to recruit most clients for 2014.

With the online portal balking, Evergreen has already altered its tactics to find more customers offline.

“It has clearly changed our marketing strategy to some extent,” Beilenson said.

Instead of relying so heavily on finding individual customers one at a time through the website, Evergreen is working harder on small-business accounts that can deliver dozens of subscribers in one deal. Ads mailed to thousands of employers produced more than 100 responses in only a day, Beilenson said.

At least Beilenson can call Dr. Joshua Sharfstein, Maryland’s health secretary, when he wants to complain or get something fixed. One day last week he talked five times to Sharfstein, who Beilenson says has been “very responsive.”

Other co-ops are unlikely have the same kind of advantage. Maryland is one of a minority of states in charge of its own Obamacare software. Co-ops in Arizona, South Carolina and elsewhere rely on the federal government’s healthcare.gov site, which by many accounts is the most troubled of all.

“We continue to have significant challenges,” says Kathleen Oestreich, CEO of Meritus Health Partners, Arizona’s co-op, which is sold through the federal portal. “Some people are expressing some frustration but not across the board by any means.  Many people understand it is a big system, and will take a bit to make it work.”

Meritus is trying to take more advantage of brokers and face-to-face meetings with potential customers.

“Brokers are showing great interest,” she said. Still, two weeks after the federal marketplace was supposed to open, she added, “we wish the enrollment had really begun in any material way.”

What many describe as one of the most successful state-run portals, Kentucky’s, “has corrected some of the initial log jam and we are hearing reports that things are running smoother,” says Janie Miller, CEO of the Kentucky Health Cooperative. “We are excited and pumped but don’t have actual enrollee counts yet.”

Nobody is pushing the panic button. March 31, the end of enrollment, is several months away.

Co-ops are well financed with federal loans. Evergreen holds enough capital to be in good shape even if it doesn’t reach what Beilenson calls “self-sustaining” membership of 15,000 or 20,000 in the first year, he said.

But with few confirmed customers so far and no revenue, Evergreen and its peers have much more at stake in the Obamacare software than their established competitors.

3 Responses to “Rocky Opening Leaves Health Law’s New Co-Ops Jittery”

  1. Steve Walser says:

    “Co-ops are well financed with federal loans.”
    Well! Isn’t that nice? So much easier to compete when you get a healthy dose of free government money. The fact that this has become so common tells one all one needs to know about the corruption of our system of government and its heavy hand that skews unfairly towards the favored few.
    Whatever one thinks of Obamacare this fact alone should alarm all citizens.

  2. Webster says:

    Loans, not grants.

    And they’re competing against established companies with a very narrow window to get the customers they need. It’s certainly not ideal, but those loans are far from the most objectionable parts of the law.

  3. Konabianca says:

    How long will it be before Maryland taxpayers are forced to bailout this government-financed insurance business?

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