NCPA - National Center for Policy Analysis

Health Insurance Co-ops Lose Taxpayer Money While Trying to Gain Market Share

March 10, 2015

The insolvent Iowa-based health insurance cooperative, CoOportunity Health, was taken over in December by Iowa insurance regulators.  Iowa and Nebraska's Guarantee Associations — and state and federal taxpayers — are now on the hook for millions in claims the insurer could not pay, says National Center for Policy Analysis senior fellow, Devon Herrick.

CoOportunity Health was not a traditional health insurer.  Rather, it was a taxpayer-funded, non-profit health insurance cooperative (co-op) established under the Affordable Care Act (ACA). Numerous flaws plague the co-op program.


  • In 2014 — its first year selling health insurance — CoOportunity lost around $163 million.
  • An attorney hired to help liquidate the firm says doctors and hospitals are still owed some $100 million.

The spectacular failure of CoOportunity Health was a wakeup call to other health insurance cooperatives, state insurance regulators, HHS and taxpayers. However, it will not be the last co-op that goes broke owing taxpayers large sums of money.  Going forward, state insurance regulators and other government regulatory bodies need to be on the lookout for co-ops that have strategic plans premised on losing taxpayers money while gaining market share — expecting taxpayers to bail out the insurer.  

When co-ops were established, they had no customers and no historical actuarial data to assist in setting plan premiums.  Startup funds and cash reserves were mostly borrowed from taxpayers. According to industry data, only one of the 23 co-ops was profitable last year (a 24th co-op located in Vermont failed before it even got off the ground). While some of the remaining co-ops are losing money because of small size, others appear to have the strategy of losing money to gain market-share at taxpayers\' expense.

Source: Devon Herrick, "Government Bailouts Business Strategy for Obamacare Health Insurance Co-ops," National Center for Policy Analysis, March 9, 2015. 


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