Health overhaul co-ops bad news for taxpayers

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.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top