ACA Fail Fractal
Obamacare Co-Ops Looking Like Solyndra?

Last winter, CoOpportunity Health, one of the 23 health care co-ops created by the ACA, went under after it could no longer afford to pay for the care of its customers, who turned out to be sicker than the co-op expected them to be. The co-op was one of the only insurers offering ACA plans in Iowa, and its collapse was a victory for big insurers. In the wake of its demise, it remains uncertain whether the company will be able to pay back federal loans of $147 million.

It now appears that CoOpportunity Health is not alone in the predicament it found itself. In case you missed it, the New York Times recently picked up on an audit released last month of the 23 co-ops created under the law. The story does not paint a pretty picture: 22 out of 23 co-ops lost money last year, and many could find it hard to repay the 2.4 billion that the federal government spent overall on the co-ops.

The story notes that not all the news is bad: Some of the co-ops are doing better than others, and some quoted by the Times predict that the co-ops’ financial situations will improve over time. Even there, however, the news is mixed, for one way some of these co-ops may become solvent, and thus able to pay back their federal loans, is by raising premiums:

The Kentucky plan lost $50 million last year, more than any other insurance co-op, as it paid out $1.25 in claims for every dollar it collected in premiums.

“We attracted many consumers with serious illnesses,” Ms. Dunlap said. “One of our most popular plans had low premiums, low out-of-pocket costs and a large network of providers. It’s difficult, it’s uphill, but we are energetic and hopeful. Trends are going in the right direction.”

The Kentucky insurance commissioner recently approved rate increases averaging 25 percent for the Kentucky Health Cooperative in 2016. The co-op said the additional revenue would help reduce its losses.

In the case of CoOpportunity Health, the failed company may be able to use other federal money due to it through the risk corridor program to discharge some of its liabilities. But if it will take big premium hikes to enable some of the co-ops to repay their federal loans, that’s the kind of cure that is worse than the disease.

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