Several nonprofit insurance companies established under President Barack Obama’s health care overhaul have been playing with house — or rather, taxpayer — money. And now they’re losing in a major way.
Health Republic Insurance of New York, a taxpayer-funded Consumer Operated and Oriented Plan, just announced that it’s going under. The CO-OP has lost over $130 million in taxpayer money and will end coverage for more than 200,000 members.
It’s the fourth — and largest of the Affordable Care Act’s 23 CO-OPs to fail.
More CO-OPs will soon follow suit. As they collapse, they’ll leave hundreds of thousands of customers scrambling to find health insurance. But the real losers will be taxpayers, as these CO-OPs have wasted billions of federal dollars.
Health care CO-OPs grew out of the Affordable Care Act. The idea behind them was that community members and organizations — including doctors, hospitals, and businesses — would work together to operate the co-operative and insure themselves through it. The health care law made billions of dollars available in start-up loans from the federal government to help fund CO-OPs around the country.
As compared to the exchanges established under the Affordable Care Act, this member-driven model was supposed to inject competition into the health care market by providing an alternative to — and a check on — for-profit insurance companies.
But CO-OPs have been a disaster. New York’s is a prime example. Initially, it showed signs of success. When it opened, it enrolled over 150,000 members — almost five times the expected figure.
But problems surfaced almost immediately. Consumers filed thousands of complaints, claiming that the CO-OP failed to provide sufficient information, lacked transparency, and had poor customer service.
Then, costs spiraled of control. In 2014, the plan lost $78 billion in taxpayer money. This year, it squandered another $53 million before state and federal regulators ordered that it be shut down.
New York’s CO-OP is hardly unique. Last year, 22 of 23 CO-OPs lost money. The average CO-OP is paying out $117 in claims for every $100 in premiums it takes in. Their balance sheets won’t accommodate that sort of math much longer.
This waste needs to end. CO-OPs are not leading to affordable, quality care. It’s time to recognize that they are a failure, and that the Affordable Care Act has gambled away more than enough of Americans’ tax dollars.