Eight of 11 Surviving Obamacare Co-Ops Facing Failure

By Richard Pollock Published on February 25, 2016

Eight of the 11 remaining Obamacare health insurance co-ops are in serious financial trouble and could collapse by the end of the year, Mandy Cohen, a top federal health official told Congress Thursday in testimony before a House oversight panel.

Cohen, the chief operating officer for the Centers for Medicare and Medicaid Services, generally stonewalled the House Oversight Subcommittee on Health Care, Benefits and Administrative Rules during a hearing focused on the status of the surviving Obamacare health insurance co-ops and the additional costs taxpayers could face in the event of more failures.

Twenty three of the non-profit co-ops were established under Obamacare in 2012 to compete with commercial for-profit insurance companies. But so far half — or 12 — have closed their doors after only two years of operation. A thirteenth co-op in Vermont was never licensed to operate.

Cohen stubbornly refused to disclose which of the remaining 11 are struggling, but conceded that eight now face either federal “enhanced oversight” or are operating under a federal “corrective action plan.”

Cohen refused to guarantee any of the three co-ops not presently operating under a corrective plan would survive the year. “Too early to tell in the year,” Cohen said. “As new information comes up, if we need to, we will put more folks up on corrective action plans.”

The CMS corrective plans identify operational problems, management deficiencies, poor vendor oversight, pricing problems, an inadequate medical network or a deficient business strategy, according to Cohen.

The co-ops face “challenges,” Cohen told the panel, but refused to predict which are likely to fail, saying “they don’t fix overnight.” She also declined to estimate how much more taxpayers will lose on the co-op program or how much, if any, will be recovered.

“We are just learning how much we will lose,” she said.

About $1.4 billion of the $2.5 billion in Obamacare loan funding was lost when the 12 failed co-ops went under.

Cohen ominously hinted that many local hospitals, medical clinics and doctors may not be paid for services they delivered to co-op patients, because federal law requires that the government be first in line among creditors.

“For federal loans, there is an order of repayment,” she said. “I believe we are at the very top of all of the creditors,” but who gets paid “is on a case-by-case basis” determined by the Justice Department.

Subcommittee Chairman Jim Jordan, an Ohio Republican, wanted more public information for consumers about the performance of the surviving co-ops, but Cohen stoutly resisted the suggestion.

“So your position is that certain information can’t get out because it would somehow jeopardize the ability of co-ops to survive,” he said. “I fail to see that. Somehow if we get information about enrollment projections and profitability, that’s going to ruin their reputation? Really?”

Cohen said she was “happy” to share that information in private.

“If consumers get that information that’s somehow it’s going to hurt them,” Jordan asked. “That’s the kind of information they need to know so they can say, ‘look, this thing is going down.’”

Cohen still refused to disclose the troubled co-ops, saying that was up to the state insurance commissioners. “That’s really the job of the state department of insurance.”

Cohen also declined to discuss how many of the surviving co-ops were failing to meet enrollment projections. “I can’t speak to the specifics of any one of the co-ops, but that’s definitely a factor we look at,” she said. “We’re first getting in the data.”

Rep. Buddy Carter, a Georgia Republican, told Cohen the federal government ought to pull the plug on all of the remaining co-ops. “One of the things they told us is when you’re in a hole, stop digging,” he said. “We’re in a hole here. Why are we still digging?”

Cohen responded that “we share your concern here. This program certainly have challenges,” and she promised “extensive and aggressive oversight” by her agency.


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