Dive Brief:
- Nevada Health CO-OP, a nonprofit created through federal funding intended to increase competition on the Nevada Health Link marketplace, announced this week that it will not stay in business after Jan. 1, 2016.
- The decision was made due to a second year of high claims costs and limited growth projections, said CEO Pam Egan.
- The co-op plans to maintain enrollees' policies through Dec. 31 and to continue paying broker commissions, but the nonprofit's ability to repay its $65.9 million in federal loans is in question.
Dive Insight:
The failure of Nevada Health CO-OP did not come as a surprise to observers. While it had a strong start in 2013, it struggled against high operating losses, as have all the other 22 state co-ops except the one in Maine.
The co-ops have been criticized as overly idealistic and expensive, having cost the federal government $2.4 billion in total.
Among Nevada Health CO-OP's mistakes, observers say, was an enrollment process that had no waiting period and added an extra 30 days in late 2014, which brought in a sicker pool of enrollees. The bigger issue, however, may have been the co-op's overhead. It has been criticized for having an administrative expense-to-premium ratio of 37% while the maximum allowed under the ACA is 20%. Among those high overhead costs, notes the Las Vegas Review-Journal, was former CEO Tom Zumtobel's salary of $417,000 per year.