A new Michigan health insurance company is launching in a move that signifies the changing marketplace under health care reform.
Consumers Mutual Insurance of Michigan received its initial certificate of authority from state regulators as it prepares to begin offering plans to individuals and small group employers on the state’s health exchange, an online marketplace for purchasing insurance that launches Oct. 1.
The East Lansing-based insurer is a consumer-operated and oriented plan (CO-OP), a new type of nonprofit mutual insurance company created by the Affordable Care Act.
Under this model, profits are reinvested to improve the organization, keep premiums low, reduce out-of-pocket costs or expand benefits. By the end of its second year of operation, 51 percent of the board will be comprised of customers, or members.
Consumers Mutual received a $72 million low-interest loan from the federal government to get off the ground. It must be repaid by 2033.
Fifteen county health plans throughout Michigan came together and applied for the loan to create the insurer. The health plans offer basic health care benefits to the uninsured, but most of them anticipate closing their doors after 2014 because funding will be cut as part of health care reform.
“We wanted to make sure that the population we currently cover would have options,” said Robin Reynolds, executive director of Ingham Health Plan Corp. and one of Consumer Mutual’s founders.
Many county health plan members would qualify for Medicaid if Michigan decides to expand the coverage, while others could be served by the new insurance CO-OP, which will focus on consumers with incomes between 138 percent and 400 percent of the federal poverty level. (Up to about $94,000 for a family of four.)
These consumers also would be eligible for federal tax credits to help pay for premiums.
“It’ll be nice to have another option on the exchange that will be more affordable and will be competition to the other insurers to keep rates lower,” Reynolds said.
The insurer has not yet released premium prices. It will have to file plans and rate filings with the state by the end of May in order to participate on the health exchange.
Consumers Mutual hopes to have about 37,000 or 38,000 members throughout the state by the end of 2014, said CEO Dennis Litos.
The company employs 22 people with plans to have 30 or 31 by the end of the year. It doesn’t have plans for additional facilities other than a small office in the northern Lower Peninsula.
“What really differentiates us is we’re a nonprofit mutual insurance company operating under what we call these CO-OP principles,” which are much like a credit union in the banking industry, Litos said.
Litos formerly served as CEO of Ingham Regional Medical Center in Lansing (now known as McLaren Greater Lansing). He most recently worked as a principal consultant with Lansing-based Health Management Associates.
Consumers benefit from having more choices, said Andy Hetzel, spokesman for Detroit-based Blue Cross Blue Shield of Michigan.
Blue Cross, the state’s largest health insurer, recently began transitioning into a nonprofit mutual insurer.
“This type of co-op company or mutual company represents a significant competitive challenge to long-established insurers for lower income people who will be receiving federal subsidies to buy their coverage on the health insurance marketplace,” Hetzel said in response to Consumers Mutual. “The rest of the industry, the Blues included, are going to have to make some rapid adjustments on how we design products to be competitive on price in this new market for customers.”
May 15th, 2013