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ACA Fail Fractal
Big Insurers Win as ACA Co-Op Collapses In Iowa

One of the only two carriers offering ACA insurance in Iowa could soon collapse. The Affordable Care Act created CoOportunity Health alongside twenty-three other health care cooperatives. The company began to sell insurance in Iowa and Nebraska in 2013, and acquired around 120,000 members in those two states. Experts thought the co-op would succeed because they trusted its leadership, but it is now nearing financial collapse as the federal government has cut off some funds the company was getting. The payouts covered by the plans have started to exceed the cash the company has to pay them, and regulators have taken over the company. More, via the Des Moines Register (h/t Jake Meador):

In the court papers, state officials also said federal administrators declined to provide more “solvency funding” to the company. When asked about that Wednesday, [program spokesman Aaron] Albright said federal officials “had to prioritize” co-ops’ requests for assistance, because their requests totaled more than the available money […]

[Insurance Commissioner Nick] Gerhart said existing customers’ coverage will continue, but he expects most CoOportunity members to switch to other carriers. For individual policyholders, that move must be made by Feb. 15, the national deadline for enrolling in coverage for 2015. […]

One of the theories behind the ACA was that competition among insurers on the state exchanges would help bring down costs, but in Iowa, at least, there is now likely to be no competition at all, as Coventry Health Care will be the only insurer left on the exchange if CoOportunity falls completely. Coventry is owned by Aetna, one of the biggest insurers nationally, a Fortune 100 company with an active lobbying presence on Capital Hill. The other company poised to win from from CoOportunity’s collapse is Iowa’s biggest insurer, Wellmark Blue Cross and Blue Shield, which decided not to sell plans on the exchange. That means its plans are not eligible for the federal subsidies provided by the ACA, but Wellmark was nevertheless quick to remind its customers that, “This is unfortunate news and timing for CoOportunity Health policyholders. Wellmark and its authorized agents are here for anyone who has questions about the health insurance options available to them.”

In other words, an ACA initiative has failed in Iowa and Nebraska, and its failure will cause huge disruptions and uncertainties in the lives of many state residents currently covered by CoOportunity. Not only that, but it could mean premium hikes all around. Some claim CoOportunity’s high posted premiums for 2015 sprung from the high concentration of especially sick residents in its risk pools. But if all those customers migrate to Coventry or Wellpoint, they will bring their risks with them, driving up costs for customers of those insurers. And a total CoOportunity collapse would solidify the monopolies large insurers possess in those states, cutting across the very cost control force the ACA hoped to harness.

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  • Suzyqpie

    Well, darn. I just read that Vermont is giving up on single-payer health care because of ballooning costs. Vermont is fortunate to have one of the few Democrats, Gov Shumlin, who can do math. Democrats usually don’t do math especially not actuarial math.

  • Andrew Allison

    “Experts thought the co-op would succeed because they trusted its leadership, . . .” Experts? Really? Gruberists would be closer to the mark. The most significant take-away is, “Albright said federal officials “had to prioritize” co-ops’ requests for
    assistance, because their requests totaled more than the available
    money […]”, in other words, all the co-ops are in trouble. It appears, surprise, surprise that the Consumer owned and operated (co-op), but funded by the taxpayer, business model has serious flaws.This is rather like the government subsidizing, private companies in which no private investor is willing to invest. As Einstein famously said, the definition of insanity is doing the same thing over and over again and expecting different results.
    Another question which comes to mind is, why is there only one private
    carrier in Iowa? Seems that the market must have been rather unattractive.

  • FriendlyGoat

    1) Glad to hear (from the Des Moines Register piece, but unfortunately not here) that the other 23 Co-ops around the country do not seem to be facing current solvency problems.

    2) Sorry to hear that part of CoOportunity’s problem was related to the Iowa and federal governments allowing some healthy people to keep their old now-non-compliant policies through 2016 (see Des Moines Register).

    3) Glad to hear Wellmark will now likely be saddled with some of the risks it should have had all along.

    • James Stagg

      Reference !): Sixteen of the “other 23” are teetering on the edge. That’s why there’s not enough fed money to go around to support all of them. Stay tuned for the latest…………………

  • ata777

    You ain’t seen nothin’ yet. Wait until the risk corridor/reinsurance programs that guarantee no insurance company will lose money expire in 2017. When the insurers no longer have the American taxpayer as the ultimate backstop–a backstop that allows them to set premium rates artificially low–Americans will be hit with massive increases in their bills. Look it up. It’s the ultimate ObamaCare time bomb.

  • GeorgeHanshaw1

    The ACA bill was really only a placeholder for a more rational plan that was supposed to be developed in Conference with the House. But then the dems lost their 60th vote in the Senate and the dems either had to let healthcare reform die or accept the poorly written Senate bill already passed.

    They opted to take what they could get, and in doing so doomed any sort of viable federal healthcare program for another generation.

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