Health Care

For Obamacare Co-Ops, Teamwork Is a Survival Strategy


Some yet-to-be-determined sliver of the 7.1 million people who got health insurance on the federal exchange picked plans from co-ops. In each state these nonprofit startups face different competitors and market conditions and even get their referrals from enrollment exchanges of varying competence. Some have had success early in competition with established insurers; others have struggled to gain traction.

Yet to think of each of the 23 co-ops as an organization working alone misses the quiet ways that they’re helping each other gain scale. “Co-ops, we’re babes in the woods,” says Martin Hickey, chief executive of New Mexico Health Connections and the head of the National Association of State Health Co-Ops. Hickey says that to increase the odds of survival, the new kids are sticking together.

The co-ops created under the Affordable Care Act have small staffs—Nevada, New Mexico, and New York all have around 40 employees each—so they tend to outsource different portions of their operations. Many co-ops join weekly conference calls to share what they’re doing. “I tell you,” Hickey says, “I have been able to save so much labor.” To develop the bid documents to hire vendors, he has just “gotten someone else’s and tweaked it.”

The co-ops at times select the same vendors for services, often along with nearby states. “You get scale and better service,” Hickey says. The Utah and Colorado co-ops hired the same advertising firm. Ohio, Louisiana, and Kentucky use one pharmacy benefits manager. Tennessee and South Carolina both selected the same company to advise doctors on evidence-based medicine and, along with Kentucky and Connecticut, contracted with yet another company to improve patient outcomes. Six states, including Iowa, Utah, Montana, and Arizona, use the same online enrollment provider.

The co-ops also share ideas on new programs to implement. Hickey says another co-op gave him the idea to drop co-pays for behavioral health visits, “because that underlies so many diseases.”

Tom Zumtobel, the chief executive of the Nevada Health Co-Op, says he’s particularly close to his co-op counterparts in neighboring mountain states. They meet up quarterly and right now are talking about how to structure their corporate governance. Under the Affordable Care Act, the co-ops started with help from nonprofit “sponsors,” but within two years, members must make up more than half their boards.

Then there’s gaining scale through straight-forward expansion. The Iowa co-op also sells insurance in Nebraska and has more than 63,000 members so far (pdf). The Freelancers Union helped sponsor co-ops in New Jersey, New York, and Oregon, all of which run independently while sharing similar websites and identical logos.

More direct connections across state lines are coming next year. The co-op in Massachusetts plans to open up in New Hampshire, despite tiny enrollments in its home state so far. Kentucky Health Cooperative will go into West Virginia next year, and Montana’s setting up shop in Idaho.

For co-ops, the question will be whether buddying up and other cost-saving measures help them offer lower prices. That, after all, is the most important factor in determining how many customers will choose a co-op over other local options.

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Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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