The CMS is closely monitoring the finances of eight of the remaining 11 not-for-profit co-ops created by the Affordable Care Act. House Republicans used the uncertain fate of the insurers as a punching bag for the law during a hearing Thursday.
The House's Oversight and Government Reform Subcommittee on Health Care, Benefits and Administrative Rules heard testimony about the co-op program, which saw 12 of its 23 insurers shut their doors as of Dec. 31. Republicans absorbed most of the time with questions and didn't hesitate to throw in political jabs at the law that is universally despised by the party.
Republican lawmakers, who have not voted on or proposed an alternative to the ACA, were concerned the remaining co-ops would close and thereby waste taxpayer money. The CMS issued approximately $2.5 billion in loans to the startup insurers, which amounts to a nominal percentage of the overall HHS budget.
Some Republicans said the loans are “propping up Obamacare” when there's no certainty the remaining insurers will be solvent in the future.
“We're in a hole here. Why are we still digging?” Rep. Buddy Carter (R-Ga.) said.
Eight co-ops are operating under corrective action or enhanced oversight plans, Dr. Mandy Cohen, the CMS' chief operating office, told the House Thursday. That means the CMS has identified potential problems with operations of those co-ops, but it doesn't necessarily indicate they immediately face bankruptcy or closure.
The CMS is trying to recoup the federal loans from the co-ops that have collapsed, Cohen said. She also said it's too soon to determine how the remaining co-ops will fare this year, since they are still analyzing their enrollment figures from the 2016 open enrollment.
“They're small businesses, and they're still getting their foothold on this business,” Cohen said.
Experts and analysts have said the ACA's co-ops faced multiple barriers to success being new entrants to health insurance. They had to build networks of hospitals and doctors from scratch while competing with large carriers with well-known brands and more financial resources. They also faced several political hurdles, including severe restrictions on their loans, reduced initial funding and major stonewalling from Congress.
Compounding those problems last year were two risk-stabilization programs created by the ACA. Co-ops and other insurers had expected to receive money from the temporary risk corridors program, but the Republican-led Congress required that risk corridor funding be budget-neutral. Consequently, the CMS paid out only 12.6% of expected payouts last year, which the failed co-ops blamed for their demise. One co-ops, however, has filed a class action lawsuit against the government to get those payments, according to a lawsuit first reported by the Portland Tribune.
Further, co-ops and other newer insurers unexpectedly had to pay money under the risk-adjustment program. Insurers with higher amounts of low-cost, healthy enrollees pay into the program to help out others that have high-cost, sicker members.
Even though co-ops had many extremely sick people sign up for their coverage, several had to pay into the risk-adjustment program because they didn't have a lot of claims data to show the health status of their enrollees. Their membership essentially looked healthier than it actually was because many diagnoses hadn't been captured yet.
Al Redmer Jr., Maryland's insurance commissioner and former CEO of insurer Coventry Health Care of Delaware, told Congress that Maryland's co-op has been successful. Evergreen Health Cooperative, which has 36,000 members, is expected to turn a profit this year.
But he said challenges like the flawed risk-adjustment program and lack of risk corridors funding would handcuff any small business that is trying to get off the ground.
“We are setting up carriers around the country to fail,” Redmer added in written testimony. He suggested that the government exempt “new and fast-growing plans,” like co-ops, from risk adjustment for the first three to five years, or limit risk-adjustment payments to 2% of the plan's premium revenue.
The CMS said almost three-quarters of consumers in shuttered co-ops moved to a new marketplace plan in 2016. Affected co-op enrollees still have until Feb. 28 to sign up for a plan due to a special enrollment period.