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Friday
Jan302015

CoOportunity Health: The Solyndra of ObamaCare

Under ObamaCare, health Co-Ops—non-profits that provide insurance—are allowed to receive federal grant money to start up operations in the ObamaCare exchanges.  There are 23 such Co-Ops.

CoOportunity Health, which serves Iowa and Nebraska, was the first one to collapse. The Iowa State Insurance Commissioner, Nick Gerhart, took over the failing CoOportunity Health in December.  Last week, he announced he’d be liquidating it.  But look on the bright side: The $146 million in taxpayer dollars lost on CoOportunity Health is a bargain compared to the $536 million that went down the drain known as Solyndra!

CoOportunity Health’s problems were twofold.  First, it signed up a lot of people who have chronic conditions and then couldn’t charge enough in premiums to cover their medical claims.  According to the Des Moines Register, “Federal officials wouldn’t let CoOportunity charge enough in premiums to cover those people’s costs, and the carrier wound up losing piles of money before dropping out in October.”

The second problem was President Obama’s November 2013 decision to allow insurers to let people keep their plans through 2016 even if they didn’t meet ObamaCare standards.  Although at least 4 million (and probably closer to 6 million) people on the individual market lost their plans, Obama’s executive order did save some of them, including many who had policies with Wellmark in Iowa.  “Critics of the extensions say this means insurers [like CoOportunity Health] just entering the market must take on people with chronic illness without having much chance at attracting Wellmark’s relatively healthy, long-standing customers,” according to the Register.

So, on the one hand, ObamaCare forces insurers to take all comers, including people with serious and costly illnesses.  On the other hand, the action needed to make good on the President’s repeated promise that “If you like your plan, you can keep your plan,” prevents those insurers from attracting healthier customers that can help cover the costs of the sicker ones.  Nice system you got there!

The future looks bleak for most of the other 22 Co-Ops.  A recent report by A.M. Best found that only one Co-Op had not incurred losses by the 3rd quarter of 2014.  The losses among all of the Co-Ops totaled $244 million.

We were warned.  Back in July 2013, the Office of the Inspector General of the Department of Health and Human Services released its investigation of the applications to the Federal Government by 16 Co-Ops.  It stated there was “little evidence of private monetary support in any of the 16 applications we reviewed. Additionally, 11 of 16 CO-OPs reported estimated startup expenditures in their applications that exceeded the total startup funding ultimately provided by CMS.”  As the Heritage Foundation’s Ed Haislmaier put it, “The government is a lousy venture capitalist.”

Taxpayers have forked over $2 billion to health Co-Ops, and it would be more if Republicans hadn’t shut the grant program down in the 2012 “fiscal cliff” legislation.  That move was heavily criticized at the time.  Now it looks prescient.  Kudos to the GOP for that one.  

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