On her hour-and-20-minute commute from Verona to Brookfield, Cathy Mahaffey often finds herself considering what it would be like to work in an industry with a little more predictability than hers.
“I know nothing is certain in life, but sometimes I wonder what it would be like to work in a place with some certainty,” Mahaffey said.
Mahaffey is certainly committed to her work as chief executive officer of Brookfield-based Common Ground Healthcare Cooperative, a nonprofit, member-governed health insurance co-op that launched in 2014 under a provision of the Affordable Care Act, which Republicans in Congress now plan to repeal.
It remains to be seen what, if anything, Republicans replace the Affordable Care Act with, which creates uncertainty for the health insurance industry.
Certainty has been hard to come by in Common Ground’s three years of operation.
“We’re extremely nimble and flexible and really fast-moving,” Mahaffey said. “We make decisions thoughtfully but quickly. We’re small, so we’re able to do that. We have really had to learn how to be able to quickly assess a situation and quickly adapt.”
After three years of losses, that kind of quick, strategic approach to decision-making could be proving to turn the tide for the co-op, which posted a profit in the first quarter of this year.
Today, it’s only one of five health care co-ops nationwide still in business, down from the original 23.
The early days
Long before the current debate over health care reform, before the Affordable Care Act even went into effect, a coalition of community members in Milwaukee was looking for affordable health care solutions for small employers and individuals.
When the landmark health care law passed in 2010, bringing with it a provision for the creation of nonprofit member-governed health insurance co-ops, it aligned with the group’s mission and Common Ground was born. The group brought in some experts to help with the effort and applied to become a co-op.
Drawn to the mission of doing “the right thing for the right reasons,” Mahaffey – whose background includes leading Farmers’ Health Cooperative of Wisconsin and Madison-based cooperative The Alliance – signed on in September 2011 as chief operating officer.
In February 2012, Common Ground was awarded a $107.7 million loan from the federal government and began preparing for its Jan. 1, 2014 launch. Mahaffey became CEO later that year.
“Not only were we starting a health insurance company from scratch, which is hard enough, but we were doing it in a very new environment called the Affordable Care Act environment, where not everyone was sure what the rules were ultimately going to be,” Mahaffey said. “… It’s really hard to price a set of products when you don’t know who your customers are going to be. You don’t have any data on your customers …. We had a lot of good people around the table and made as informed decisions as we could have.”
In the early days, the co-op received new guidance weekly from the federal government, while the exchange launched in a rocky rollout riddled with IT glitches.
On top of that, Common Ground had to change its course early on by bringing all of its services in house after a third party administrator failed to provide its promised services.
With 25,000 members that first year, membership far exceeded Common Ground’s initial projections of 10,000.
“A lot of people needed to buy health insurance,” Mahaffey said. “The high-risk pool ended in Wisconsin – all of those people certainly needed health insurance. Then folks who had been uninsured before and they learned that they qualified for a subsidy, and now it’s affordable for them. And there was the Medicaid shift in eligibility …. A lot of available market share.”
It also soon became apparent that the individual mandate penalty lacked teeth, and healthy people – who it was hoped would buy insurance to help offset the cost of members with higher medical needs – sat out of the exchange. And those who did sign up for insurance had higher needs than expected.
Co-ops launched with the expectation of receiving “risk corridor funding” from the federal government, but that didn’t come through in 2015. Common Ground received only 12.6 percent of what it expected.
Meanwhile, membership continued to grow at Common Ground, swelling to 36,000 in 2015.
“Insurance companies were promised the ability to offset some of this pent-up demand and folks with critical medical needs,” Mahaffey said. “We need to accept them and provide comprehensive coverage, but we needed help to get through. That’s when co-ops started to close.”
Adjusting products, premiums
In 2016, Common Ground made a decision to eliminate one of two product lines on the individual market – a broad network option – and raised premiums. Membership dropped to 17,000.
In September 2016, the co-op received a cash infusion of $30 million from an undisclosed party.
“That was absolutely necessary for our continued survival,” Mahaffey said.
In the first quarter of this year, Common Ground saw net profit of $2.7 million. Mahaffey likewise expects a “good showing” in the second quarter.
“We’ve been working really hard to make good business decisions,” she said. “It’s been a challenge when it’s our only business line …. We’re trying to fight the good fight to make sure people are insured. But it’s certainly not easy. We’re really needing Congress to do something because I don’t think it’s sustainable the way it is.”
Namely, Mahaffey said, insurance companies need certainty regarding cost-share reduction payments, funding to get through this period of instability and impactful enforcement of the individual mandate.
Whether Congress can pass meaningful reform has yet to be seen, but Mahaffey stressed something has to change, either at the federal or state level.
“There are different winners and losers in any scenario,” Mahaffey said. “Before the ACA, there was a set of winners and losers. Now with ACA, there’s a different set. It’s hard to make it work for everyone, but some things can be done now to help more people.”