Small Health Insurance Co

Many of us know the names of some of the big U.S. health insurance companies - like Blue Cross, Aetna, and Wellpoint. But what about CoOportunity Health, or Health Republic Insurance of New York? These are among 23 new companies started under The Affordable Care Act. They're all non-profit, member-owned insurance cooperatives that were begun, in part, to create more competition and drive prices down.

The co-ops' rollout was funded almost entirely by federal government loans. Initial enrollment numbers for many look pretty good - but that may not be enough to make co-ops successful.

Karl Sutton, for one, says he's stoked about being able to buy health insurance through a co-op. Sutton lives in a scenic region of Montana just south of Glacier National Park, where tall, dark forests and taller mountains are blanketed white in early March.

During my visit, there's about two feet of snow on the ground, and it's zero degrees Farenheit outside. But it's warm inside Sutton's mobile greenhouse, and green plants are emerging from the dark earth. He grows vegetables to sell at nearby markets in Missoula and Kalispell.

'This is just spinach we overwintered, he says pointing to a row of small, leafy plants. 'We're just eating it ourselves.'

Sutton understands co-ops because he works in one: a 10-year-old growers co-op, with revenue of more than a million dollars a year. It's run by and for its members.

Sutton says he wants that model for his health insurance company, too.

'When you buy into a co-op, that entitles you to one vote in the decision making, and I think it's the one business model that actually aligns with our democracy,' he says. Sutton was eager to join the new Montana Health CO-OP. He thinks if members own the company, they're less likely to overuse health care - and that saves everyone money.

He knows the insurance startup is new, and still unproven.

'There's a degree of concern,' he says, 'but ... we might as well try, because if we don't have the membership, then the health care co-op isn't going to succeed. So we have to start somewhere, and I'm willing to take that risk.'

A couple hundred miles and several mountain ranges away, John Morrison has a comfortable law office in Last Chance Gulch, the downtown historic district of Montana's capital, Helena. Morrison was the first president of the National Alliance of State Health CO-OPs.

' When you buy into a co-op, that entitles you to one vote in the decision making, and I think it's the one business model that actually aligns with our democracy.

'In some states co-ops are dominating the marketplace,' Morrison says, 'with 80 percent of the enrollees going to the co-op.'

That's in Maine. Morrison says most co-ops are very happy with their enrollment numbers. Their rates are often the lowest that are available through an exchange.

'The co-op states have 8.4 percent lower premiums, on average, than [other states] across the marketplace,' says Morrison. 'So co-ops are creating that competition. They're keeping rates down in the states they're operating in.'

But not everybody thinks those lower premiums in some states are directly tied to whether the states have a co-op option. Bob Laszewski, an insurance industry consultant, says low prices in a company's first year don't mean much.

'We haven't seen any claims yet,' Laszewski says. 'Getting the premium in the health insurance business is the first part of the business; having [a big] enough premium to pay the claims over time is the real test.'

The co-ops do have a financial cushion: federal startup loans of about $100 million each. That gives them several years to readjust prices to cover all the health care their members will need. It's likely that many of their customers are people insurance companies avoided in the past - patients who either couldn't afford insurance before the new health law's subsidies, or who were previously turned down because they were sick, says Laszewski.

'These co-ops have to make it in this most problematic niche of all,' says Laszewski. 'In particular they're not in the large employer market, which is the bread and butter for these guys. They're not in the Medicare Advantage business; they're not in the Medigap business; they're not in the Medicare part D business. Those are the profitable businesses in the industry.'

Jerry Dworak, head of Montana's co-op, says there is enough of a margin in the new exchange market for his company to survive. He says he's especially happy with the number of customers he's been able to get in spite of Healthcare.gov simply not working for the first two months it was open.

'Never in my wildest imagination, with the political capital that was involved in this thing did I think you'd hit Healthcare.gov and it [would be] blank!' Dworak laments. 'I never thought that was going to happen!'

But Montana's co-op still has managed to win about 40 percent of the new exchange market. Co-ops now have 50 percent of the new market in Nebraska and Iowa, and 60 percent in Kentucky. Dworak attributes Montana's early success, in part, to tirelessly beating the bushes for customers.

'It's grassroots,' he says. 'One thing about Montana: What really plays is what one Montanan says to another one in a coffee shop.'

This story is part of a reporting partnership between NPR and Kaiser Health News.