Almost all of Obamacare’s landmark health insurance co-ops are in financial trouble.
The co-ops were invented by the health-care law — they’re private nonprofits that were awarded a total of $2.4 billion in loans from the federal government, in order to establish nonprofit competition to private health insurance companies. Most of the 23 Obamacare co-ops failed to meet their own enrollment and profitability expectations in 2014, according to a report from the Department of Health and Human Services Inspector General — and 21 of 23 totaled up a net loss for the first year of Obamacare’s operation.
That’s to be expected in their first year of operation, according to CMS, but 19 of the 23 nonprofits’ losses exceeded their own projections for the first year. Four co-ops performed so badly that the agency charged with overseeing both the health-care law and the co-ops, the Centers for Medicare and Medicaid Services, put them on enhanced oversight or corrective action plans, and two additional co-ops were given low-enrollment warning notifications. but CMS did not establish any criteria or guidance for the fledgling companies to determine whether a co-op was ultimately sustainable at all, according to the report.
The IG report follows independent figures which found that 22 co-ops had reached net losses by the end of 2014. Thomas Miller, a resident health care fellow at the American Enterprise Institute, and Grace-Marie Turner, president of the Galen Institute, crunched the numbers in June and told The Daily Caller News Foundation that the net losses reached a record $614 million for 2014. (RELATED: Are Obamacare’s 22 Health Insurance Co-ops Near Financial Collapse?)
The financial plight for companies is in large part caused by the low enrollment in health plans. Nonprofit co-ops were heralded by some as an opportunity for customers to find lower premiums. The report notes that for some co-ops, however, it was high-priced health insurance offerings that prevented the co-ops from competing with lower-priced, brand-name insurance companies.
Other culprits that got several co-ops into trouble with enrollment: management changes that hindered the companies’ working ability; and, as always, the technical difficulties endured by almost all Obamacare exchanges in 2014.
In the worst scenario, three co-ops in Arizona, Illinois and Maine clocked in at just 4 percent of expectations by the end of 2014. In Arizona and Illinois, enrollment in those co-ops has fallen even further in the first six months of 2015. In Maine, the co-ops have garnered another 207 customers, bringing the grand total to 1,907 — a far cry from the almost 39,000 customers the nonprofit projected.
Meanwhile, New York’s co-op has been the largest enrollment success, exceeding its projections by 504 percent. It too has lost enrollees in the first half of this year.
Financial troubles at so many of Obamacare’s prized co-ops could bring worries that the $2.4 billion in taxpayer loans may not end up being paid in full. Some co-ops are already closing down, just a year and a half since they first began.
Iowa’s co-op, CoOportunity Health, was taken over by the state in December 2014 after losing so much money, and was liquidated in March of this year. The company received $146 million in federal taxpayer loans. (RELATED: Iowa Obamacare Insurer’s Collapse Could Leave Customers On The Hook For Thousands)
And another co-op in Louisiana is expected to join it by the end of the year. Louisiana Health Co-operative has announced that it will close its doors on Dec. 31, 2015. The company, like many others, is struggling from low enrollment higher-than-expected medical costs which its premiums just can’t cover, Modern Healthcare reports.
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