RENEE MONTAGNE, HOST:
A startup of sorts has failed. The Affordable Care Act offered loans to a different type of insurer called a co-op. The co-ops are supposed to help offer low-cost insurance in places without many traditional options. One of the largest co-ops is in Iowa. It's called CoOpportunity Health. And even though it got over a hundred thousand customers in Iowa and Nebraska, it's about to go under. Iowa Public Radio's Clay Masters reports.
CLAY MASTERS, BYLINE: It was a heck of a Christmas for David Fairchild and his wife, Clara Peterson. They found out they were likely about to lose their new health insurance.
DAVID FAIRCHILD: Clara was listening to the news on Iowa Public Radio. And that's how we found out. You know, I went to their website that night, no information. We still haven't gotten a letter about it.
MASTERS: The two are just getting their day started at their home just north of Ames on this frigid late-morning in central Iowa. They are the sole employees of a cleaning service and work nights. Fairchild has chronic leukemia but treats it with expensive meds. Last year, they saved hundreds of dollars switching to CoOpportunity from their old insurer, Wellmark. Fairchild says they felt like they finally had room to breathe.
FAIRCHILD: Basically, it covered our office visits, covered exams. It covered all but $40 of the medicine every four weeks. It was just - it was marvelous. Like I say, it was probably too good to be true.
MASTERS: Was it too good to be true? Hard to tell, says Pete Damiano with the Iowa Public Policy Center. He says CoOpportunity hit kind of a perfect storm. First, they had to pay a lot more medical bills than they thought they would.
PETE DAMIANO: CoOpportunity Health's pool of people was larger than expected, was sicker than expected. And so their risk became much greater than the funds that were available.
MASTERS: The reason the co-op's customers were sicker has a lot to do with what the insurance market looked like in Iowa before Obamacare. The largest insurer by far was and still is Wellmark. They decided not to offer any plans on the exchange. Damiano says this meant many customers who flocked to CoOpportunity tended to be like Fairchild, people with expensive health problems who had trouble paying for insurance before in the market Wellmark dominated.
DAMIANO: It was always going to be a challenging market to try to reach. On top of that, the whole idea of co-ops, again, is something that was relatively new and experimental. But it was to try to create competition on that private sector approach.
MASTERS: Not only were the patients sicker, but CoOpportunity initially thought they would enroll about 12,000 people in Iowa and Nebraska. They got 10 times that many according to Nick Gerhart, Iowa's insurance commissioner. And third, Gerhart says the company thought it was going to get more federal money.
NICK GERHART: On December 16 around 4 o'clock, we were informed they were not going to get any further funding. So nothing was pulled; it just wasn't extended further.
MASTERS: Gerhart is now essentially the CEO of the co-op because the state has taken it over. He likens it to a business suddenly having its credit shut off by the bank. And even though CoOpportunity is not officially dead yet, Gerhart is telling CoOpportunity customers to switch insurers. He says it's too early to make predictions about the fate for all co-ops.
GERHART: Ours is the second-largest in the country. So you've got to look at it that way and say, if the second-largest can't make it, how viable are the other ones? I don't know. But at the end of the day, they did not have enough capital to support 120,000 members.
MASTERS: But the co-op's failure has left David Fairchild and Clara Peterson scratching their heads.
CLARA PETERSON: I mean, the whole Affordable Care Act is, you know, competition between insurance companies. And now we're back down to what?
MASTERS: One, which they've already gone on to healthcare.gov to switch to. They're now waiting for approval for a plan that will cost a lot more. For NPR News, I'm Clay Masters in Des Moines.
MONTAGNE: And that story is part of a reporting partnership with NPR Iowa Public Radio and Kaiser Health News.