Govt: Health Law Co-Ops Seeing Red Ink 07/30 06:20
WASHINGTON (AP) -- Nonprofit co-ops, the health care law's public-spirited
alternative to mega-insurers, are awash in red ink and many have fallen short
of sign-up goals, a government audit has found.
Under President Barack Obama's overhaul, taxpayers provided $2.4 billion in
loans to get the co-ops going, but only one out of 23 --- the one in Maine ---
made money last year, said the report out Thursday. Another one, the
Iowa/Nebraska co-op, was shut down by regulators over financial concerns.
The audit by the Health and Human Services inspector general's office also
found that 13 of the 23 lagged far behind their 2014 enrollment projections.
The probe raised concerns about whether federal loans will be repaid, and
recommended closer supervision by the administration as well as clear standards
for recalling loans if a co-op is no longer viable. Just last week, the
Louisiana Health Cooperative announced it would cease offering coverage next
year, saying it's "not growing enough to maintain a healthy future." About
16,000 people are covered by that co-op.
"The low enrollments and net losses might limit the ability of some co-ops
to repay startup and solvency loans, and to remain viable and sustainable,"
said the audit report. A copy was provided to The Associated Press.
Although the audit only goes through the end of 2014, problems apparently
persisted into this year. A preliminary review of 2015 data by government
officials shows that enrollments have increased, but co-ops continue to report
Officially called Consumer Operated and Oriented Plans, nonprofit co-ops
were a compromise after liberals were unable to achieve their goal of using the
2009-2010 health care debate to create a government-run insurance program
competing against corporate insurers. Under the deal they struck, taxpayers
would provide two types of loans: startup money and reserve funds to meet
solvency standards set by state regulators.
As recently as the spring, the White House touted co-ops as an
accomplishment. "In states throughout the country, co-ops have competed
effectively with established issuers and attracted significant enrollment,"
said a report by the president's Domestic Policy Council on the fifth
anniversary of the health law.
The IG's audit paints a very different picture. Among its findings:
---Maine was the only co-op in the black for 2014, with $5.9 million in net
income. Losses ranged from a high of $50.4 million for Kentucky's co-op to $3.5
million for Montana's. Most of the co-ops had previously projected losses for
2014, but the actual losses they experienced tended to be higher. Illinois had
projected $28 million in income and instead came in with a loss of $17.7
million. New York, the leader in enrollment, had a $35 million loss.
---Thirteen co-ops fell far short of their enrollment projections, and nine
met or exceeded them. New York enrolled 155,400 people, more than five times
what it had projected. But co-ops in Arizona, Illinois and Massachusetts only
hit 4 percent of their enrollment targets. There were no year-end data for the
Iowa/Nebraska co-op that was shut down.
---Low enrollment and medical claims expenses that exceeded the income from
premiums contributed to the losses. Nineteen co-ops had medical claims that
exceeded premiums. The reasons included higher-than-expected enrollment of
people with expensive health problems, lower-than-expected enrollment of
younger people, and inaccurate pricing of premiums.
Separately, the AP used data from the audit to calculate per-enrollee
administrative costs for the co-ops in 2014. It ranged from a high of nearly
$10,900 per member in Massachusetts to $430 in Kentucky.
In a written response to the audit, Medicare chief Andy Slavitt said the
administration agrees with the findings as well as the IG's recommendations for
closer oversight and clearer standards. He also offered a defense of the
co-ops, saying they don't have an easy job.
"The co-ops enter the health insurance market with a number of challenges,
(from) building a provider network to pricing premiums that will sustain the
business for the long term," Slavitt said. "As with any new set of business
ventures, it is expected that some co-ops will be more successful than others."
The administration "takes its responsibility to oversee the co-op program
seriously," he said.