Oba­macare co-op plans cut in half by fail­ures $1.2 bil­lion in fed­er­ally backed loans is wasted

The Washington Times Weekly - - National - BY TOM HOW­ELL JR.

More than half of Oba­macare’s non­profit co-op plans have failed, with Michi­gan be­com­ing the lat­est to an­nounce it will not of­fer plans for next year, prompt­ing Repub­li­cans to la­bel the pro­gram a dis­as­trous waste of tax­payer money.

Con­sumers Mu­tual In­sur­ance of Michi­gan’s an­nounce­ment means 12 out of 23 co-ops have dropped out of the mar­ket­place, cost­ing tax­pay­ers about $1.2 bil­lion in gov­ern­ment-backed loans, ac­cord­ing to Repub­li­can analy­ses of ini­tial loan amounts.

It’s the lat­est dent in Pres­i­dent Obama’s sig­na­ture health care law, which is strug­gling to meet pro­jec­tions as it be­gins its third year of full op­er­a­tions. The gov­ern­ment now es­ti­mates that just 10 mil­lion Amer­i­cans will sign up for plans on the health care ex­changes for next year, far short of the 21 mil­lion that bud­get an­a­lysts ini­tially pro­jected.

Mean­while, the co-ops, which were in­tended to be al­ter­na­tives to the poli­cies of­fered by for­profit in­sur­ers, have been fail­ing at a star­tling rate in re­cent weeks. They have con­cluded that they can­not meet their own ex­pec­ta­tions for of­fer­ing low pre­mi­ums while cov­er­ing cus­tomers’ needs.

“Only in Wash­ing­ton would a group of bu­reau­crats think they knew how to mi­cro­man­age com­pe­ti­tion in­stead of let­ting con­sumers and mar­kets do what they do best. What could go wrong? Turns out, quite a lot,” said Rep. Kevin Brady, Texas Repub­li­can and chair­man of the Ways and Means sub­com­mit­tee on health, which held a hear­ing to in­quire about the fail­ures.

An­a­lysts say the co-ops strug­gled to ride out tur­bu­lence in the emerg­ing mar­ket­place. In some cases, claims out­weighed what the co-ops took in through pre­mi­ums, caus­ing the plans to fail and forc­ing hun­dreds of thou­sands to seek al­ter­na­tives on the Oba­macare mar­ket­place for next year.

Mandy Co­hen, chief op­er­at­ing of­fi­cer at the Cen­ters for Medi­care and Med­i­caid Ser­vices, told law­mak­ers that some co-ops were suc­ceed­ing, though the ad­min­is­tra­tion had hoped for “a bet­ter bat­ting av­er­age here.”

She said mul­ti­ple fac­tors led to the co-ops’ demise. For one thing, they started from scratch with no his­tory of claims to set their prices, lead­ing them to dra­mat­i­cally mis­cal­cu­late their in­come ver­sus costs. They also had to build provider net­works and com­pete with well-es­tab­lished play­ers in the mar­ket.

Ms. Co­hen also sug­gested that Congress ex­pe­dite the pro­gram’s un­rav­el­ing by grant­ing the co-ops only $2.4 bil­lion in gov­ern­ment sub­si­dies rather than the $6 bil­lion called for un­der the 2010 Af­ford­able Care Act.

“In the face of mul­ti­ple pres­sures, it’s not sur­pris­ing that some new en­trants have strug­gled to suc­ceed,” she said.

State reg­u­la­tors have shut down co-ops at an as­ton­ish­ing clip in re­cent weeks, say­ing they needed to act quickly so con­sumers could shift to other plans by Dec. 15 and be cov­ered in time for the new year.

The rapid clo­sures re­vived an is­sue that emerged in July, when the Health and Hu­man Ser­vices Depart­ment’s in­spec­tor gen­eral said the co-ops lost hun­dreds of mil­lions of dol­lars in their first year and didn’t at­tract any­where near as many cus­tomers as they had hoped, mean­ing they could de­fault.

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