Failure of Half of U.S. Health Insurance Co-ops Sparks New GOP Criticism

Several Republicans Thursday heaped blame on the Obama administration for the failure of more than half of the cooperatives set up under the health law to infuse competition into the insurance market.

The collapse of 12 out of 23 operating co-ops is providing a fresh opportunity for the GOP to criticize the Affordable Care Act and make the health law a talking point in the presidential election. The criticism was aired at a hearing by a House Energy and Commerce subcommittee to examine the failing startups, which received more than $1 billion in federal loans that may not be paid back.

Republicans pointed the finger at Health and Human Services and the Centers for Medicare and Medicaid Services, saying the federal agencies erected hurdles that imperiled the co-ops’ survival and haven’t been forthcoming in providing information on what went wrong.

“It was another example of the administration’s desire to conduct dangerous experiments with our nation’s health care,” said Dr. Michael Burgess (R., Texas) of the co-ops. “The rate of failures continues to accelerate.”

Democrats criticized the GOP for using the collapse of the co-ops to attack the health law—and said Republicans share responsibility because they cut funding that hobbled co-ops’ financial security.

“This should not be a partisan issue, we should all figure out what’s going on with these closings,” said Rep. Diana DeGette, (D., Colo.)

The 2010 law gave seed money to establish co-ops to compete with larger and more established insurers. Co-ops have now collapsed in a dozen states: Arizona, Colorado, Iowa, Kentucky, Louisiana, Michigan, Nevada, New York, Oregon, South Carolina, Tennessee and Utah. They insured more than 550,000 consumers.

The Obama administration hasn’t explained why some co-ops, such as those in Kentucky and New York, got additional solvency loans despite fiscal problems, said Sen. Ben Sasse (R., Neb.) in testimony. The administration also hasn’t addressed when the government will be paid back the millions the co-ops got in low-interest loans, he said.

“We still don’t have any good answers,” he said.

Requirements by the Centers for Medicare and Medicaid Services are posing barriers to success, said Dr. Peter Beilenson, CEO of Maryland’s Evergreen Health co-op. He said needed changes include amending loan agreements to allow co-ops to raise private capital and revising a risk formula that puts co-ops at a disadvantage.

New York’s co-op is in such dire financial shape that its policies will no longer be available after Nov. 30 instead of the end of December. That is leaving more than 100,000 of its customers with less than two weeks to obtain new coverage by a Nov. 15 deadline.

Roughly 400,000 customers are covered by the existing co-ops, some of which are also facing financial difficulties. Democrats said at Thursday’s hearing that the downfall of co-ops will restrict competition, potentially leading to higher premiums.

“This was set up for failure from day one,” said Rep. Chris Collins (R., N.Y.) “We’re here because Obamacare was set up for failure. You know the saying, you can put lipstick on a pig but it’s still a pig. That’s what we got here.”

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