All CO-OPs Likely to Fail, House Panel Chairman Says

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By Sara Hansard

July 13 — All 23 of the ACA CO-OPs will likely fail, the chairman of a House subcommittee said July 13.

“My guess is every single one of these is going to fail,” Rep. Jim Jordan (R-Ohio) said at a hearing held by the House Oversight and Government Reform subcommittee, which he chairs. The ACA Consumer Operated and Oriented Plan (CO-OP) in Illinois failed July 12, bringing the number of failed nonprofit insurers to 16 out of the 23 that were started (see related article) .

The Illinois CO-OP failure was the backdrop for the hearing, where Republicans focused on problems encountered under the ACA. Kevin Counihan, chief executive officer of the ACA marketplace, said at the hearing that six of the seven remaining CO-OPs were on corrective actions plans but that the CO-OPs have nevertheless provided consumers with more choice and added competition to the marketplaces. Counihan didn't identify which of the remaining CO-OPs isn't on a corrective action plan.

Government Spent $1.7B on Failed CO-OPs

The nonprofit CO-OPs were intended to be alternatives to the Affordable Care Act’s public option plans. The federal government has spent $1.7 billion in loans on the failed CO-OPs, according to a press release issued July 13 by the House Energy and Commerce Committee.

Jordan said all CO-OPs that have been put on corrective action plans thus far have failed, and he called the program “a complete failure.” The government is unlikely to get the money back, he said.

Counihan said the Department of Justice is working with the failed CO-OPs to recoup the loans that were made to them. A total of $2.4 billion in low-interest loans has been made to the 23 CO-OPs, Jordan said.

870,000 People Affected

About 870,000 people have been affected by the CO-OP failures, Rep. Scott DesJarlais (R-Tenn.) said. He suggested that consumers should be warned that two-thirds of the CO-OPs have failed.

Counihan disagreed, saying states have certified the CO-OPs' actuarial standards, capital standards and solvency requirements. “If the state certifies that CO-OP, that feels to me that they should be on a level playing field with any other issuer,” he said.

“The CO-OP program is not the whole Affordable Care Act,” Counihan said. Health insurance “is a very, very tough, low-margin business.”

Medicaid Issuers Most Successful

“If you look at issuers that have had a strong Medicaid background, that have served the Medicaid population, that look to design and customize care management tools that are more specific to this new population, they're finding themselves being more effective than those that have just traditionally served, say, the small group insurance market or the large group market,” Counihan said.

Rep. Mark Meadows (R-N.C.) said that “the amount of money spent per Medicaid patient is higher than the other patients typically.”

Many insurers are “hemorrhaging a loss of money” in the ACA marketplaces, including Blue Cross and Blue Shield of North Carolina, which expects premium hikes of more than 20 percent for 2017 on top of large increases in previous years, Meadows said.

Counihan disagreed that higher expenditures are necessary for marketplace enrollees.

“There's a clear opportunity for issuers that have followed this market more strategically, that have used a lot of data to understand the specifics of their market, understand the uninsured in their state, design products that meet them, [establish] tier networks that are appropriate, and provide good cost-management tools,” he said.

Long History of Premium Variability

Premium increases are expected to be higher in 2017 than they were in 2015 and 2016 as some programs intended to help insurers recoup the cost of covering sick enrollees end after 2016 and insurers try to stem losses in the ACA marketplaces.

Health-care consulting firm Avalere Health July 13 released an analysis finding that average premium increases for silver plans in 14 states is 11 percent for 2017. Consumers can limit increases by selecting lower-cost silver plans, which are set to increase 8 percent, Avalere said.

Linda Blumberg, a senior fellow with the Urban Institute Health Policy Center, told the subcommittee that “there definitely has been a long history of variability in premiums from year to year,” and there is “huge variation by geographic area.”

The areas that tend to have the largest premium increases are the smallest population centers and areas where premiums in prior years were low compared with the national average. “Some of these insurers came in too low and they're correcting now, but it's not necessarily that they're all going very high,” she said.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

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