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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 
financial losses.

   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.


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