ObamaCare Co-Op Failures Growing


The failures of ObamaCare just keep on coming. In prior posts, I’ve discussed failures in enrollment numbers and deductibles that average over $6,600 for individuals and $13,000 for families. Today we’ll discuss the ever-increasing numbers of ObamaCare Co-Ops that have already failed or are on life support.

The Wall Street Journal says the ObamaCare Co-Ops (Consumer Operated and Oriented Plans) were intended as a liberal insurance utopia. These plans were seeded with billions of dollars in federal start-up loans and were supposed to work like the credit unions or the electric collectives of the Depression era. No profits were allowed, advertising to introduce new products was restricted and industry executives were barred from management.

The implicit taxpayer bailout of these co-ops allowed them to gamble on undercutting their competitors with low premiums that would gain them market share. They expected that any losses would be picked up by the taxpayers.

By the most recent count, 8 of the original 23 co-ops chartered in 2013 are bankrupt already and eleven have received notices from the Centers for Medicare and Medicaid Services (CMS) placing them on “enhanced oversight.”

The Kentucky Health Cooperative is going out of business, leaving 51,000 members looking for new insurance coverage. It had the second-largest co-op enrollment in the country, capturing 75% of people who enrolled in coverage through the state’s health exchange. The Kentucky co-op posted a “medical loss ratio” of 158% for 2014 – that means they spend $1.58 in expenses for every $1.00 of premium collected.

Health Republic Insurance of New York takes the prize for largest co-op failure with 215,000 members. They pocketed $274 million in federal loans, most of which will never be repaid. Other notable failures include CoOportunity Health in Iowa and Nebraska, Louisiana Health Cooperative and Nevada Health Co-Op. Over 400,000 citizens have lost their insurance – thus far.

Reasons for Failure

ObamaCare proponents blame the failures on Republicans (as usual) who reminded the White House that the law called for the risk corridor provision to be revenue neutral. As a result, these health plans received only 12.6% of the money they asked for to bail out their failed co-ops. The reason for this is that the health plans and co-ops that lost money did so at a rate eight times greater than those that made money. The difference was a net loss of $2.5 Billion!

Robert Laszewski, insurance industry analyst, questions criticism of Republicans for holding the Obama administration to the intent of the law. He quotes Aaron Albright, a spokesman for CMS who said in January 2014:

“The temporary risk corridor provision in the Affordable Care Act is an important protection for consumers and insurers as millions of Americans transition to a new coverage in a brand new marketplace. The policy, modeled on the risk corridor provision in Part D that was supported on a bipartisan basis, was estimated to be budget neutral, and we intend to implement it as designed.(emphasis added)


Laszewski says the co-ops were poorly designed, poorly managed and doomed to failure from the outset, but Democrats can take full responsibility for this failure since no Republicans voted for the law. He calls these co-ops “the canaries in the ObamaCare coal mine.” They bode poorly for the future survival of ObamaCare.

According to The Washington Post, of the 23 ObamaCare insurance co-ops in business on June 30, 2015, 20 of them were losing money. Most show losses ranging from $4 million to over $50 million! The tables below document the financial status of the co-ops. Those that are shaded have already closed or will be closing by the end of 2015.

Co-Ops I

Co-Ops II

One comment

  1. The government should not be in control of health care (a good example is the Veterans Administration). They had to lie to pass it. Congress wanted no part of it for themselves … Enough said.

    Comment by Joseph Malloy on March 13, 2016 at 5:15 pm