Senate subcommittee presses CMS on failed insurance co-ops
Half of those set up under the Affordable Care Act three years ago have failed, costing taxpayers over $1 billion
In 2016, health insurance co-ops have gained needed enrollment but half of those set up under the Affordable Care Act three years ago have failed, costing taxpayers over $1 billion, according to a Senate subcommittee which has been investigating what went wrong.
Bad decisions were made with taxpayers' money, according to Ron Portman, chairman of the Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations.
Witnesses in Thursday's hearing included Andy Slavitt, acting administrator for the Centers for Medicare and Medicaid Services, and Kevin Counihan, Marketplace CEO and deputy administrator.
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From the beginning Health and Human Services was aware of the problems with failed enrollment strategies, pricing, financial forecasts and management and yet continued to pump more money into failing co-ops that showed no signs of turning around, Portman said.
Of the 23 Consumer Operated and Oriented Plans set up as health insurance nonprofits to give consumers more choice, 12 have gone under.
"Those twelve collectively received $1.2 billion in taxpayer money that is almost certainly lost," Portman said. "And their collapse caused 740,000 people in 14 states to lose their health insurance provider and have to scramble to find new coverage in little to no time."
Deloitte Consulting did an analysis of the co-ops, which was reviewed by the committee.
"Those reports showed that, starting almost immediately, the failed co-ops experienced severe financial losses that exceeded even the worst-case scenarios outlined in their loan applications to HHS," Portman said. "Cumulatively, by the end of 2014, the failed co-ops exceeded their projected worst-case-scenario losses by at least $263.7 million--which is four times above the projection."
During 2014, CMS provided about $352.5 million in additional solvency loan funding, Slavitt said.
"While co-ops are primarily responsible for their own success, CMS will continue to help them identify and correct issues and make improvements," Slavitt said.
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The failed co-ops have more than $700 million in unpaid medical claims to doctors and hospitals, Portman said.
"Plan year 2016 is a critical year for these co-ops -- they must move from startup to stability and improve their financial capabilities," said Counihan.
The co-ops cover more than 350,000 people, nearly triple their total from 2014, according to information released at Thursday's hearing. Enrollment is growing better than expected and patient populations appear to be getting younger and healthier.
Twitter: @SusanJMorse
