Most co-op exchange health plans losing money, OIG report says

Member enrollment also falls below projections, despite the jump in insured population nationwide.

Most insurance plans established under the Affordable Care Act are losing money and may have difficulty repaying millions in loans, according to an audit report released by the Office of Inspector General.

Twenty-one of the 23 co-ops audited had a net loss, according to the report.

The finding was made despite the rise in the number of people gaining insurance through the ACA marketplace.

[Also: Employers not ditching employee health plans for private exchanges]

"Factors such as low enrollment and net losses could limit the ability of some co-ops to repay startup and solvency loans and to remain viable and sustainable," HHS Inspector General Daniel R. Levinson said.

Most of the 23 co-ops reviewed had not met their initial program enrollment and profitability projections as of December 31, 2014, the report stated. The projections were made in the initial loan application.

Specifically, member enrollment for 13 of the 23 co-ops that provided health insurance in 2014 was considerably lower than the co-ops' initial annual projections; and 21 of the 23 co-ops had incurred net losses as of December 31, 2014.

[Also: 10.2 million paid for insurance on Obamacare marketplaces]

The cooperatives were established to expand the number of health insurance plans available through the exchanges. The Department of Health and Human Services provided loans to help establish the new consumer-governed, nonprofit health insurance issuers.

The federal funds cannot be used for marketing, which co-ops complain puts them at a competitive disadvantage against large health insurance plans.

The audit stated that although the Centers for Medicare and Medicaid Services recently placed four co-ops on enhanced oversight or corrective action plans and two co-ops on low-enrollment-warning notifications, CMS had not established guidance or criteria to assess whether a co-op was viable or sustainable.

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The OIG made several recommendations, including: the Centers for Medicare and Medicaid Services continue to place underperforming co-ops on enhanced oversight or corrective action plans; work with state insurance regulators to identify and correct underperforming co-ops; provide guidance or establish criteria to determine when a co-op is no longer viable or sustainable; and pursue available remedies for recovery of funds from terminated co-ops.

In written comments on the draft report, CMS agreed with the recommendations. CMS said it had taken a number of steps to further oversee co-op compliance by requiring external audits, site visits and additional financial reporting.

Twitter: @SusanMorseHFN