NCPA - National Center for Policy Analysis

Health Co-Ops Never Had a Chance

November 8, 2013

When the new health care law was being cobbled together, Congress decided to establish a network of nonprofit insurance companies aimed at bringing competition to the marketplace, long dominated by major insurers. But these co-ops, started as a great hope for lowering insurance costs, are already in danger, says the Washington Post.

  • Their failure would leave taxpayers potentially on the hook for nearly $1 billion in defaulted loans and rob the marketplace of the kind of competition they were supposed to create.
  • And if they become insolvent, policyholders in at least half the states where the co-ops operate could be stuck with medical bills.
  • The Obama administration has estimated that more than a third of the nearly $2 billion it has lent to co-ops will not be repaid.

Despite the obstacles, co-op leaders say that the federal loans will help them succeed and that it is imperative that they do.

But Karen Davis, a professor of health policy management at the Johns Hopkins Bloomberg School of Public Health, says the co-ops were not designed with the support they need to thrive. "One provision after another got stuck in there to limit their probability of success," she says. "It's a little ironic to say you are for competition in the free market and then you don't make it easy for new entrants."

Source: Jerry Markon, "Health Co-Ops, Created to Foster Competition and Lower Insurance Costs, Are In Danger," Washington Post, October 22, 2013.


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