Health Insurance COOPs Pose Big Risk to Taxpayers’ Wallets

“Non-Profit” Option Broke Without Taxpayer Bailout: NCPA

Source: NCPA 

Health insurance cooperatives are hemorrhaging money, paying out far more in medical claims than they can cover with their artificially low premiums – and expecting taxpayers to pick up the slack, warns National Center for Policy Analysis Senior Fellow Devon Herrick in a new report.

“Although some Consumer Operated and Oriented Plans (COOPs) are losing money due to incompetence, others appear to be playing chicken with taxpayers’ money to gain market share,” says Herrick. “Insurance commissioners need to be on the lookout for COOPs whose strategic plan is premised on losing taxpayers’ money to gain customers.”

According to industry data, only one of the 23 COOPs was profitable last year, while the remainder lost $224 billion through the first three quarters of 2014. A 24th COOP in Vermont flopped before becoming operational.

CoOportunity Health, a COOP that accounted for one-fifth of all COOP enrollees nationally, failed less than a year after it began offering coverage to the public, defaulting on $145 million in taxpayer loans and shorting doctors and hospitals enormous amounts of money. According to the report, CoOportunity Health’s questionable strategic plan aimed to gain large numbers of enrollees by:

  • underpricing premiums to gain market share;
  • shifting losses to taxpayers by relying on emergency solvency loans and risk-adjustment distributions, and;
  • likely increasing premiums after the dust settled.

“The spectacular failure of CoOportunity Health was a wakeup call to other health insurance cooperatives, state insurance commissioners, the U.S. Department of Health & Human Services, Congress and taxpayers,” says Herrick. “But it won’t be the last COOP that goes broke, owing taxpayers large sums of money. This strategy will likely play out again and again until most of the COOP health insurers lose all their taxpayer financing and go bankrupt.”