When it passed Congress in 2010, the Affordable Care Act offered substantial financial support to create nonprofit health-insurance plans. Today 11 of the 23 such regional Consumer Operated and Oriented Plans have failed—seven since the beginning of October.
They’ve collapsed despite federal startup loans totaling more than $1.1 billion. These loans will likely never be fully repaid, while insurers and consumers will be on the hook for any unpaid claims left behind by failed insurers.
Consider CoOportunity Health, which operated in Iowa and Nebraska and received a federal startup loan of $146 million. The Iowa and Nebraska Life and Health Insurance Guaranty Associations, funded by insurers in the states, have begun paying more than $80 million to cover outstanding claims to providers which CoOportunity Health was unable to pay in its insolvency.
In the summer of 2013, a self-employed woman in western Nebraska showed me her cancellation letter for a health plan she liked—a plan President Obama had promised that she, like the rest of Americans, could keep. As she shopped for a new plan, CoOportunity Health offered premiums substantially lower than the competing plans, and she signed up.
In November 2014 CoOportunity Health announced that her platinum plan would no longer be offered. She chose another plan—and not long thereafter received a third cancellation letter, notifying her the co-op was going out of business and instructing her to find a new insurance provider before the end of the open enrollment period on Feb. 15, 2015.
As a result of CoOportunity Health’s liquidation, nearly 120,000 Nebraskans and Iowans lost coverage. And that’s just one plan.
Other collapsed co-ops and their loan amounts include: $65.8 million to Louisiana Health Cooperative, $65.9 million to Nevada Health CO-OP, $265 million to Health Republic Insurance of New York, $146 million to the Kentucky Health Cooperative, $73.3 million to Tennessee’s Community Health Alliance, $72.3 million to Colorado HealthOp, $60.6 million to Health Republic Insurance of Oregon, $87.6 million to Consumers’ Choice Health Insurance Company in South Carolina, $89.7 million to Arches Health Plan in Utah, and $93.3 million to Arizona’s Meritus Health Partners.
To date, more than half a million Americans have lost coverage thanks to the failure of these co-ops. The reason? The co-ops took on far too many customers at artificially low premiums, and, as the American Enterprise Institute and the Galen Institute noted earlier this year, are drawing down “unspent loan funds to pay medical claims.”