NCPA - National Center for Policy Analysis

Subsidized Health Insurance Co-ops are Failing

September 4, 2015

Under the Affordable Care Act (ACA), health insurance exchanges were created to increase competition in areas with few carriers. In 2012, 23 Consumer Operated and Oriented Plan (CO-OP) programs, supported by $2.4 billion in loans from the federal government, were created to provide insurance coverage in 26 states. As of December 2014 of the original 23 programs, 21 had year-end net losses, another generated a profit and one, due to financial concerns, was under the state's insurance commissioner's control. 

  • Louisiana Health Cooperative, the recipient of $65.6 million in loans from the Center for Medicare and Medicaid Services, is closing in December 2015.
  • Iowa's CoOpportunity Health was liquidated in March due to higher than anticipated medical claims.  The co-op was originally loaned $145 million.
  • Nevada's Health Co-Op will close down in December 2015 due to "challenging market conditions."

Possible factors for lower-than-projected enrollment include:

  • Technical difficulties such as web site crashes and long wait times.
  • Delays in obtaining required licenses resulting in unavailable insurance plans at the beginning of open enrollment period.
  • Changes in management.
  • Higher priced health insurance than other health insurers.

The Department of Health and Human Services recommended oversight and corrective action for underperforming co-ops, to attempt recovery of funds from terminated co-ops and to establish a criteria to determine when a co-op should be liquidated.

Source:  Daniel R. Levinson, "Actual Enrollment and Profitability Was Lower Than Projections" U.S. Department of Health and Human Services. August 31, 2015.

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