An efficiency-based approach to determining potential cost savings and profit targets for health insurers: the case of Obamacare health insurance CO-OPs. (English) Zbl 1414.91245

Summary: This research analyzes the performance of the health insurance consumer-operated and -oriented plan (CO-OPs), examines their medical services and operating efficiency, proposes an efficiency-based goal-oriented approach for cost reductions, profit targets, premium changes, and government subsidies, and provides an important guide for improvement potentials for both the CO-OP health insurance model and other health insurers. The CO-OPs are not satisfactory in the medical services efficiency, and they are much less efficient compared with other insurers. Potential cost reductions are significant using various (conservative) efficiency goals. Most CO-OPs suffer underwriting losses, as do many other insurers; a few CO-OPs are much more operating efficient than other insurers, but all CO-OPs need significant improvement of financial performance relative to benchmark insurers. Incorporating potential cost reductions, many CO-OPs would barely require any “premium changes and government subsidies”, and they are even capable of paying back the federal loans. With both potential cost reductions and premium increases, more CO-OPs would not need any help from the government but survive on their own. This research informs public debates and all stakeholders (including management, consumers, regulators, policymakers) of improvement potentials to be considered for related decision making besides other factors including the political environment and government policies.


91B30 Risk theory, insurance (MSC2010)


Full Text: DOI


[1] Banker, R. D.; Charnes, A.; Cooper, W., Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis, Management Science, 30, 9, 1078-1092, (1984) · Zbl 0552.90055
[2] Brockett, P. L.; Chang, R.; Rousseau, J.; Semple, J.; Yang, C., A Comparison of HMO Efficiencies as a Function of Provider Autonomy, Journal of Risk and Insurance, 71, 1-19, (2004)
[3] Charnes, A.; Cooper, W.; Rhodes, E., Measuring the Efficiency of Decision Making Units, European Journal of Operational Research, 2, 429-444, (1978) · Zbl 0416.90080
[4] Cummins, D.; Weiss, M., Analyzing Firm Performance in the Insurance Industry Using Frontier Efficiency and Productivity Methods, (2011)
[5] Harrington, S., The Financial Condition and Performance of CO-OP Plans, (2015), University of Pennsylvania Leonard Davis Institute of Health Economics and Robert Wood Johnson Foundation
[6] Explaining Health Care Reform: Risk Adjustment, Reinsurance, and Risk Corridors, (2014)
[7] Kao, C.; Hwang, S.-N., Efficiency Decomposition in Two-Stage Data Envelopment Analysis: An Application to Non-Life Insurance Companies in Taiwan, European Journal of Operational Research, 185, 1, 4168-429, (2008) · Zbl 1137.91497
[8] Sherlock, D.; de Garay, C.; Ottolini, E.; Park, J., Economies of Scale in Health Insurance. Sherlock Company, (2016)
[9] Other U.S. Health Insurance Co-Ops Could Be Going Down the Same Bumpy Road as Iowa’s CoOportunity Health, (2015)
[10] Turner, G.-M.; Miller, T. P., ObamaCare Co-ops: Cause Célèbre or Costly Conundrum?, (2015), Galen Institute and American Enterprise Institute
[11] Xie, X., Are Publicly Held Firms Less Efficient: Evidence from the US Property-Liability Insurance Industry, Journal of Banking and Finance, 34, 1549-1563, (2010)
[12] Yang, C., Health Care Reform, Efficiency of Health Insurers, and Optimal Health Insurance Markets, North American Actuarial Journal, 18, 4, 478-500, (2014)
[13] Zhu, J., Quantitative Models for Performance Evaluation and Benchmarking: Data Envelopment Analysis with Spreadsheets, (2009), New York: Springer, New York · Zbl 1180.90002
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.