Illinois Obamacare Co-op Becomes 16th to Collapse

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Posted by Toni-Anne Barry on Wednesday, July 13th, 2016, 1:23 PM PERMALINK

Sixteen Obamacare co-ops have now failed. Illinois announced that Land of Lincoln Health, a taxpayer funded Obamacare co-op, would close its doors, leaving 49,000 without insurance. The co-op now joins a list of 15 other Obamacare co-ops that have collapsed since Obamacare has been implemented.  Failed co-ops have now cost taxpayers more than $1.7 billion in funds that may never be recovered.

Co-ops were hyped as not-for-profit alternatives to traditional insurance companies created under Obamacare. The Centers for Medicare and Medicaid Services (CMS) financed co-ops with startup and solvency loans, totaling more than $2.4 billion in taxpayer dollars. They have failed to become sustainable with many collapsing amid the failure of Obamacare exchanges.

Since September, 13 Obamacare co-ops have collapsed, with only seven of the original 23 co-ops remaining.  Illinois’ Land of Lincoln co-op faced losses of $90 million last year and is suing the federal government for the deficit caused by Obamacare.  Co-ops across the country have struggled to operate in Obamacare exchanges, losing millions despite receiving enormous government subsidies.

The mass failure of co-ops should not be surprising. Larger insurance companies have also struggled to operate in Obamacare exchanges with many announcing they will stop providing coverage.

The web of government subsidies have also failed to provide insurances the funds they were promised. One of these programs – risk corridors -- recouped just 12.6 percent of the funds that insurers requested. The program, which was created to encourage insurers to take on higher risk individuals by transferring funds from insurers who made money to those that posted losses, was required to be budget neutral under law leaving Obamacare insurers with a significant shortfall.

Obamacare co-ops have also been plagued by inept management and unrealistic business models.

As a report by the Daily Caller’s Richard Pollock found, 17 of the 21 co-ops paid out gratuitous salaries to executives reaching as high as $587,000, which is more than four times as much as the $135,000 median health insurance executive salary. Worse still, many of these executives had little to no experience in the insurance industry and some of these excessive salaries were disguised in financial documents as “management fees.”  Last year, 21 of 23 co-ops posted losses.

Given the trend of failing Obamacare co-ops, the collapse of the Illinois co-op will not be the last.

A list of all failed co-ops and their cost to taxpayers compiled by the House Energy and Commerce Committee is found below:

CoOportunity Health - Iowa and Nebraska
Cost: $145,312,100

Louisiana Health Cooperative, Inc.
Cost:
$65,790,660

Nevada Health Cooperative
Cost: $65,925,396

Health Republic Insurance of New York
Cost: $265,133,000

Kentucky Health Care Cooperative - Kentucky and West Virginia
Cost: $146,494,772

Community Health Alliance Mutual Insurance Company - Tennessee
Cost: $73,306,700

Colorado HealthOp
Cost: $72,335,129

Health Republic Insurance of Oregon
Cost: $60,648,505

Consumers' Choice Health Insurance Company - South Carolina
Cost: $87,578,208

Arches Mutual Insurance Company – Utah
Cost: $89,650,303

Meritus Health Partners – Arizona
Cost: $93,313,233

Consumers Mutual Insurance – Michigan
Cost: $71,534,300

InHealth Mutual – Ohio
Cost: $129,225,604

HealthyCT – Connecticut
Cost: $127,980,768

Oregon Health’s CO-OP – Oregon
Cost: $56,656,900

Land of Lincoln Health – Illinois
Cost: $160,154,812

TOTAL TAXPAYER DOLLARS: $1,711,040,390

Note: This total does not include Vermont’s CO-OP, which was denied an insurance license by the state, and was dissolved before enrolling a single person.  

Photo Credit: Fraser Elliot

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