Embittered administrators of not-for-profit health insurance co-ops on Thursday blamed higher than expected claim filings from consumers, shortfalls in federal funding and poor access to capital for the failure of nearly half of the state co-ops established under the Affordable Care Act.
In a second Capitol Hill hearing this week—this time before the House Energy & Commerce Subcommittee on Oversight and Investigations—lawmakers questioned why 12 of the original 23 co-ops have announced closure and whether the federal loans to those companies will be recovered.
James Donelon, Louisiana insurance commissioner, said the co-op in his state was established with the good intention of increasing competition, but quickly found itself in a dire financial situation. He likened it to “learning how to sail in a hurricane.”
John Morrison, vice chairman of the Montana Health Co-op, read a list of a dozen ways in which Congress impeded the success of co-ops, including federal funding cuts, caps on government loans, regulations restricting the use of private capital and not allowing enrollment limits in the first year.
Another challenge was not being allowed to use federal money for marketing purposes, Morrison said.
Co-op administrators have also pointed to the shortfalls in financing from the risk corridors program as a major reason for failure. The program paid out only about 12% of the money co-ops were counting on to help them deal with higher than expected claims and costs.
Dr. Mandy Cohen, chief operating officer for the Centers for Medicare and Medicaid Services, said the funding formula dictated the amounts paid. “That's the way the math worked out,” he said.
Rep. Chris Collins of New York, where Health Republic Insurance of New York, the largest of all the co-ops, announced recently it won't be offering policies after this month, said the co-ops failed because premiums were knowingly underpriced.
The ACA was “meant to deceive the public,” he charged. "We're here because Obamacare was set up for failure.”
Cohen said the first priority for the closing co-ops is making sure claims are paid and consumers find new insurance. Then the agency will do everything in its power within the loan agreements to recoup the loans.
