But it's well funded, backed by a $85 million federal loan.
"No one should have reservations about doing business with us," said CEO Linn Baker, noting Arches has enough reserves to pay 500 percent of its projected claims, or billings from health care providers. To be licensed by the Utah Department of Insurance, it needed only 200 percent of expected claims.
And as the state's first and only insurance CO-OP, or "Consumer Operated and Oriented Health Plan" and one of only 24 nationwide it brings a unique edge.
"Our insurance model is the way health care in Utah will get better," said CEO Linn Baker.
Insurance co-ops are a new breed of insurer championed by a bipartisan group in Congress as a private-market alternative to the hotly debated public option, or government-run health plan.
They are democratically controlled by their customers rather than outside investors, functioning like rural electric or dairy co-ops, providing an under-produced good or service in this case, affordable health coverage. Arches' board of directors will be consumer-elected, and by 2016, consumers must fill two-thirds of the seats.
"That member governance will lead to a kind of accountability that does not currently exist," said John Morrison, head of the National Alliance of State Health Co-ops. "People will be reluctant to overcompensate executives and agree to deals with hospitals that are richer than they need to be."
Today's insurers, even the non-profit ones, have no real incentive to keep costs in check, because their income is a net percentage of premiums – say the 15 percent of premiums they don't spend on health care, explained Morrison. "The more care costs, [the more they raise premiums, and] the more their 15 percent amounts to."
Arches' selling point comes from changing how doctors are paid and, subsequently, how they deliver care, which it expects to translate to lower rates, said Baker. "We're quite confident we'll have competitive pricing."
But what excites Baker what drew the founder of Utah's Public Employee Health Plan out of retirement is the opportunity for true payment reform.
Today insurers pay doctors for services as provided, a system that rewards volume over value and contributes to soaring spending.
Arches will assign patients to medical homes and pay those providers lump sums up front, giving them an incentive to keep patients healthy and out of the hospital.
For specialty care, the insurer has contracts with hospitals in each of Utah's 29 counties and is now ramping up to handle claims and price its plans.
The non-profit is targeting populations that haven't been well served by private insurers, including Latinos, who comprise a disproportionate share of Utah's 400,000 uninsured.
But it will market to anyone, the uninsured and underinsured, individuals and families, and in collaboration with brokers, to small and large employers.
"We are making good progress. By April we have to have our plans and benefits set," Baker said.
Health co-ops garnered a lot of press during debate of the Affordable Care Act when proponents of a public option heralded them as the next best way to force insurance giants to be more answerable to consumers.
Congress set aside $6 billion in competitive grants and loans to fund them. Arches is one of the 24 across the country that won funding before the pool of money became a casualty in fiscal cliff negotiations.
Republicans questioned the solvency of co-ops; others say that's a ruse promoted by big insurers who feared competition.
Regardless, Arches met "all the requirements that any insurance company has to meet to be licensed in Utah," primarily proof of solvency, said Jake Garn, chief financial examiner at the state Department of Insurance.
Arches is the first open-market health insurer to come along in at least six years, said Garn. Granite, a company set up to exclusively serve the LDS Church is the only other newly certified health insurer, he said.
If pressure is on to prove co-ops work, Arches also faces the same market uncertainty plaguing its competitors. Among the big questions still looming is how Utah's health insurance exchange marketplace, or marketplaces, will work. Utah's plan for its exchange awaits federal approval. Arches must by federal law sell its plans on exchanges.
"We're operating under the assumption that the feds will be running it in Utah," said Baker.
Baker declined to describe more of the co-op's "secret sauce" or disclose its enrollment goal for 2014.
"About this time next year," he said. "I'll know whether I want to retire or not."
What is Arches?
Arches Community Health Care is a health co-op, a new nonprofit health insurer run by consumers.
The insurer is one of 24 in 24 states awarded a start-up loan by the Obama administration. It will begin enrolling customers in individual, family and small and large group policies on October 1, 2013. Coverage will begin January 1, 2014.