CO-OPs More Evidence of ObamaCare Failure


Many Democratic leaders, including President Obama, Nancy Pelosi, Harry Reid, and liberal economist Paul Krugman continue to insist ObamaCare “is working.”

If your standard of success is millions of people getting government subsidies to purchase healthcare insurance, many of them illegally, then it’s easy to see why you’re satisfied. But if you measure success by achieving the goals you set out to accomplish, then ObamaCare has fallen short.

I’ve written a whole new book on the many ways ObamaCare falls short called The ObamaCare Reality. It’s full of fact-based analysis of where ObamaCare is failing. But now comes yet another measure that draws the same conclusion.

Consumer Operated and Oriented Plans

The Affordable Care Act created a new king of “cooperative” that supporters of this healthcare law believed would successfully compete with for-profit health insurance companies. “Cooperatives” have been successfully used by farmers, ranchers, utilities, and others to lower the price of goods and commodities in common demand.

The ACA created Consumer Operated and Oriented Plans (CO-OPs), charted and regulated by the states, to appease disgruntled advocates of single-payer and “public option” models in the health reform debate when these ideas were scrapped from the final bill.

Grace-Marie Turner and Thomas P. Miller, writing in The Wall Street Journal, now report all but one of the CO-Ops are operating in the red. One has already been shut down, and others are in precarious financial condition. No one should call this “working.”

Federal loans made available through ObamaCare helped 23 CO-Ops get started. They have enrolled more than a million people, according to the National Alliance of state Health Co-ops. They were expected by supporters to provide better benefits and lower prices than commercial insurance carriers.

But reality is that most CO-Ops have significantly underpriced their premiums and grossly underestimated medical claims. The result is nearly all are failing. Those still in operation are seeking large premium increases for 2016: 58% for individual plans in Utah, 38% in Oregon, and 25% in Kentucky.

The Iowa CoOportunity Health, which operated in Iowa and Nebraska, was the first to face financial disaster when it spent $145 million in federal loans. An Iowa court forced it to be liquidated in February. Those enrolled in this plan had to find other insurance or face penalties for non-compliance with the Individual Mandate.

Standard & Poor’s Ratings Services reported that 10 C0-0Ps had worse loss rations than Iowa’s in the third quarter of 2014 resulting from a “high medical claims trend and not enough scale to offset administrative costs.” The report cited the Iowa experience when it warned: “The solvency problems experienced by CoOportunity Health introduce questions about co-ops’ finances in general.”

Congress has cut funding for C0-0Ps three times – cuts all signed into law by President Obama. Appropriations have been reduced from $6 Billion to $2.4 billion. This money has been provided as up-front loans. Most C0-0Ps still in business are surviving on what remains unspent from these loans.

Kentucky was initially considered one of the most successful state CO-Ops with 75% of enrollees in the state’s health exchange. Many were attracted to the lower premiums they offered.

But now there are disturbing similarities to the problems experienced in Iowa. Kentucky Health Cooperative’s $147 million in taxpayer loans is exhausted. They are asking for a 25% premium increase in 2016 to maintain solvency and hoping for risk adjustment payments from other insurers who have fared better.

None of this is a surprise to those who follow the insurance industry in general. The large commercial carriers are all seeking large premium increases in 2016 as I have reported in earlier posts. (Insurers Seek Skyrocket Rate Increases) Even the “big boys” are finding the cost of providing ObamaCare benefits higher than expected. But they also enjoy much greater financial reserves to weather the storms of this healthcare reform.

Turner and Miller summarize their findings:

“Consumer Operated and Oriented Plans feed the agenda of progressives who disparage profit-driven commercial health-insurance carriers. But the co-ops are failing. Underpricing risks to gain market share and then counting on further bailouts from taxpayers is a losing business plan, and not much of a political strategy, either.”

            “Congress can exercise its oversight function by: 1) making sure that no additional federal dollars are wasted on this program; 2) investigating how $2.4 billion in taxpayer loans has been spent; and 3) determining who will be responsible for paying back the loans.”

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