Take whatever position you want; it’s the Republicans fault for cutting funding, it’s the government’s fault for not fulfilling its promises. The fact is the idea of co-ops run as non-profit health insurance organizations and so-called community based and oriented is flawed just as the same approach was flawed back in the late 1970s and 80s when virtually the same strategy was tried for the then salvation of health care, the health maintenance organization. Most of those government-funded HMOs eventually failed, many never got off the ground and then as now taxpayers wasted billions of dollars.
The fact these plans claim their troubles include not receiving as much as promised in risk dollars for high claims points out one flaw in their business model. Their prices (premiums) and capital were never adequate to sustain their expenses. The basic idea that because they were “non-profit” they could offer much lower premiums is a myth. On a good day maybe they could sustain 7% savings if they were lucky and didn’t run their business like a charity .
The grim announcements keep coming, picking up pace in recent weeks.
About a third, or eight, alternative health insurers created under President Obama’s health care law to spur competition that might have made coverage less expensive for consumers are shutting down. The three largest are among that number. Only 14 of the so-called cooperatives are still standing, some precariously.
The toll of failed co-op insurers, which were intended to challenge dominant companies that wield considerable power to dictate prices, has left about 500,000 customers scrambling to find health insurance for next year. A ninth co-op, which served Iowa and Nebraska, closed in February.
At a time when the industry is experiencing a wave of consolidation, with giants like Anthem and Aetna planning to buy their smaller rivals, the vanishing co-ops will leave some consumers with fewer choices — and potentially higher prices.
The failures include co-ops in New York, Colorado, Kentucky and South Carolina.
The shuttering of these start-ups amounts to what could be a loss of nearly $1 billion in federal loans provided to help them get started. And the cascading series of failures has also led to skepticism about the Obama administration’s commitment to this venture.
Some policy analysts [and me] say they were doomed from the beginning.
Some officials blame the government’s actions for the shuttering of some of these start-ups created under the Affordable Care Act.