Government

400,000 Citizens To Lose Health Insurance — Again — Because of ObamaCare Co-Op Failure

First make that 500,000 not 400,000

Over the last two years I have written several times about the fallacy of so-called non-profit co-op health plans (search co-ops on this blog). My view was based on my years of experience with non-profit HMOs started and financed under a federal law back in the 1970s. It’s too bad policymakers ignore history and past experience.

imageListen closely; do you hear any supporters of these plans mention the millions in defaulted loans paid for by taxpayers? Do you hear any expert on this idea acknowledge these plans could do no better controlling health insurance premiums than traditional insurance?

There is nothing inherently wrong with a co-op plan, it’s that there is nothing uniquely positive either because such plans still must deal with the cost and utilization of health care, with administering claims, etc and with the underwriting risk of its enrolled population … just as does any insurer. We were mislead when the words non-profit and consumer run were used as the good alternative to corporate profit when in fact profit is a small factor in premiums as are CEO salaries contrary to what the President used to claim.

The profit motive may be distasteful to some, but it’s also what drives efficiency, good management and accountability.

You will hear that co-ops are failing because budgets were cut to subsidize them and the government failed to provide the risk payments promised. That may be true, but the real problem is the fact they needed those payments to survive. They simply could not both set lower premiums than competitors and cover their expenses (not to mention hope to repay loans) and that wasn’t going to change simply because of artificial subsidies in the short run. 

The two largest state health insurance co-operatives created as part of a grand ObamaCare experiment have announced they are closing at the end of this year, joining others that have failed and even more that are insolvent and likely to fail.

The Kentucky Health Cooperative announced on Friday it is going out of business and will not enroll new members next year, leaving 51,000 members to find other coverage.  It had the second-largest co-op enrollment in the country, garnering 75% of people who enrolled in coverage through the state’s health exchange.

It joins Health Republic Insurance of New York—the largest health co-op with more than 150,000 members—which announced last month that it was folding.  That follows the declaration of insolvency by CoOportunity Health in Iowa and Nebraska and the failures of the Louisiana Health Cooperative and Nevada Health Co-Op.

A total of 400,000 citizens are being impacted—so far. Kentucky’s co-op had been awarded $146.5 million in taxpayer loans, including $65 million in solvency funding as recently as November of 2014.

Premium increases of more than 20% for 2016 had been approved, and the co-op had been banking on risk-protection payments from other insurers to maintain a semblance of solvency.  It had asked for $77 million from the risk corridor program but just learned it was to receive only $9.7 million, according to interim CEO Glenn Jennings.

“Today’s news regarding the wind down of Kentucky Health Cooperative is a direct result of lower-than-promised risk corridor payments that were announced last week,” said Kelly Crowe, CEO of the National Alliance of State Health CO-OPs.

Source: 400,000 Citizens To Lose Health Insurance — Again — Because of ObamaCare Co-Op Failures – Forbes

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1 reply »

  1. Think about a new version of crony socialism. Think Solyndra. Set up a structure to reward your cronies, your election money bundlers. It happens on both the left and the right.

    Decades ago, there was a coop in Wisconsin I believe called GHP, that had sold one of my affiliated companies a bill of goods. When you say health care, they said GHP. Every employee was in this option. Workers for that affiliated company who worked outside of Wisconsin complained that they were shortchanged because GHP provided great benefits at a relatively low point of purchase and point of enrollment cost. This was more typical in Wisconsin than in other locations in the US because Wisconsin (still) has hundreds of cooperatives in a variety of industries – see: http://data.uwcc.wisc.edu/Directory.aspx. In our benefits weenie world, Dick, there is even an exception written into the federal DOL MEWA rules that may apply to cooperatives.

    With GHP, there were interlocking members of the boards of directors with physician groups, hospitals, corporations, etc. The GHP leaders went so far as to negotiate not only the rates to be charged, but the employee contribution.

    My interpretation of their value proposition was that “… GHP created a process that ensures cooperation so they can successfully raise your cost.”

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