Questions raised on Colorado health insurer's business model that is reducing subsidies

Colorado HealthOP has lost more than $19 million in the first half of 2014 and is relying on new federal cost-sharing programs to balance its books and make it sustainable.

Colorado HealthOP is a nonprofit startup insurer whose decrease in 2015 premiums reduces tax credits for individuals buying from other companies in the health exchange

The insurer's head officer and the Colorado insurance commissioner both say they have no concerns about Colorado HealthOP's finances and laud their effect on the state's insurance market as being one that is forcing longtime insurers to look at holding or lowering their own rates.

CEO Julia Hutchins added that, as a new company, Colorado HealthOP never planned to be in the black right away.

But several brokers told the Denver Business Journal that Colorado HealthOP's financial position made its 2015 efforts look like a "buying the market" strategy in which an insurer lowers prices and attracts a lot of high-risk customers, which then causes it to raise prices significantly and disrupt the market the next year.

The brokers also said that by counting on federal "risk adjustment" funding to help balance its books, the insurer essentially is counting on competitors with healthier customers to subsidize its increased risk — at the same time it's lowering prices to the point where it could siphon business from those competitors based on its premiums alone.

A nonprofit company that launched last year specifically to offer insurance plans through the Connect for Health Colorado insurance exchange, Colorado HealthOP exceeded its projections by nabbing about 14,000 customers during the 2013-14 open-enrollment period.

Ed Sealover covers government, health care, tourism, airlines, hospitality and restaurants for the Denver Business Journal and writes for the "Capitol Business" blog. Phone: 303-803-9229.