ObamaCare's Huge Iowa Co-Op Failure May Be Just First
08/06/2015 07:16 PM ET
Bankruptcy: A court filing this week shows that the first ObamaCare-created insurance co-op to fail will likely cost $147 million. How many more will have to go under before President Obama admits to this boondoggle?
A few years ago, the idea of nonprofit co-ops was music to ObamaCare advocates' ears. Freed from the need to deliver profits to investors, these nonprofits would provide competition and choice to the individual market. That was the theory, anyway.
And there were few places better suited to the success of this concept than Iowa and Nebraska, states that had little competition, where uninsured rates were high and businesses were dropping coverage.
So with millions in federal low-interest startup loans, CoOpportunity was one of the first ObamaCare co-ops to get off the ground.
It was also the first to fail.
The Iowa government took it over in late 2014 and shut it down entirely a few months later.
In his most recent liquidation status report filed with the Iowa District Court in Polk County, Daniel Watkins shows why. As of June, CoOpportunity had $282.4 million in liabilities and just $108.7 million in assets. Among those liabilities is the $147 million CoOpportunity in federal startup and solvency loans that it's unlikely ever to pay back.
These losses came despite the fact that CoOpportunity had far more sign-ups than it had expected.
As far as ObamaCare failures go, CoOpportunity might be the first, but won't be the last.
An inspector general audit found that of the 22 co-ops still in operation, all but one lost money last year, with those losses totaling $376 million. And some had staggering per-enrollee losses.
Louisiana Health lost $2,069 per enrollee last year, Compass Cooperative in Arizona more than $8,000 and Massachusetts' Minuteman Health cooperative nearly $12,000 per enrollee, the IG report shows.
The only co-op that didn't lose money was Maine Community, which managed to eke out $5.8 million in net income last year.
Late last month, Louisiana's insurance commissioner announced that Louisiana Health was insolvent and would cease operations at the end of this year.
And Tennessee's Community Health Alliance — which lost $22 million last year — froze enrollment this January, calling it "a preventative measure to support the long-term viability of CHA."
All these co-ops, mind you, were hand-picked by the administration because they were deemed the ones likeliest to succeed.
Even the promise that the ObamaCare co-ops could put downward pressure on premiums turned out to be false. Last year, ObamaCare co-ops offered the lowest prices in only a third of the markets in which they competed, according to a New York Times analysis.
Connecticut's HealthyCT charged as much as 29% more. And at least 17 co-ops have put in for double-digit rate increases for next year, many of them 20% or more.
Extraordinarily low enrollment in most states also means that these co-ops can do little to disrupt the insurance market.
The GAO found that, outside New York, the average enrollment was only a little above 22,000 last year. Arizona's co-op signed up only 869 and Massachusetts' just 1,700. And while 155,000 signed up last year with New York's Freelancers Co-op, it still managed to lose $35 million and is now pushing for premium hikes as high as 21%.
In a 2012 sales pitch, the head of Iowa's CoOpportunity said that if ObamaCare's co-op program "can't work in Nebraska and Iowa, it is unlikely it can work anywhere."
Unfortunately for taxpayers, it's starting to look like he was right.
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