With the end of Obama’s presidency approaching, the end of the ill-fated Obamacare co-op experiment appears to be fast approaching too. Last week, The Ohio Department of Insurance announced that InHealth Mutual, the Obamacare co-op operating in the state would shut down and enter into receivership. This news makes InHealth Mutual the 13th Obamacare co-op to fail, a reckless experiment that has resulted in well over a billion in taxpayer dollars wasted.
Co-ops are 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. In theory, they would provide member-driven care and would not need to worry about recording a profit. In practice, they have failed to become sustainable.
The Obama administration originally provided $129 million in loans and funding to help the Ohio co-op set up. Despite this infusion of cash, the co-op struggled to operate, posting a loss of $80 million last year at a time the co-op was under strict federal oversight. The failure of Ohio’s Obamacare co-op leaves 22,000 Ohioans looking for insurance.
Ohio’s InHealth, is only one of the failed co-ops, and the losses on this program only represent a slight amount of the actual losses from the co-op program, which amount to billions. Of the 23 co-ops that were created with federal loans, more than half have failed including those in Tennessee, Nevada, New York, and Louisiana. All but two of the 23 co-ops experienced losses while operating in an Obamacare exchange, so it is almost certain that more will collapse.
This failure of Obamacare co-ops should not be surprising. As a report by the Daily Caller’s Richard Pollock found, they were plagued with poor management and high salary payouts. 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”.
Federal management over co-op funds was little better, as CMS allowed some co-ops to classify loans as assets on their financial documents rather than debt. This reclassification allowed co-ops to appear successful when they were in fact on the brink of failure.
Co-ops were also hit by lower than expected Obamacare enrollment and the poor performance of exchange marketplaces. Many co-ops were hoping to receive significant funding from the risk corridor program, which was designed to encourage insurers to take on high-risk individuals. In theory, the revenue neutral program would transfer funds from insurers who made money on an Obamacare exchange to those that experienced losses, but so many insurers faced losses that CMS was only able to issue 12.6% of the payments that were requested.
The government has wasted billions on these Obamacare co-ops. The failure of more than half of these co-ops points to the overall failure of the Obamacare law. While 10 co-ops still remain, the viability of these remaining co-ops is very minimal and they are likely to nose-dive, like the other 13 botched co-ops.
A list of all failed Obamacare co-ops and taxpayer funds spent is below:
CoOportunity Health – Iowa and Nebraska
Louisiana Health Cooperative, Inc.
Nevada Health Cooperative
Health Republic Insurance of New York
Kentucky Health Care Cooperative – Kentucky and West Virginia
Community Health Alliance Mutual Insurance Company – Tennessee
Health Republic Insurance of Oregon
Consumers’ Choice Health Insurance Company – South Carolina
Arches Mutual Insurance Company – Utah
Meritus Health Partners – Arizona
Consumers Mutual Insurance – Michigan