Not one of the failed co-ops under Obamacare has repaid a single dollar of the $1.2 billion in federal loans they received, according to a majority staff report produced by the Senate Permanent Subcommittee on Investigations.
Over the last nine months, the subcommittee investigated the 23 co-ops including the 12 that have failed and the 11 that remain in operation to see whether the Department of Health and Human Services properly handled taxpayer dollars in investing in these programs.
“The Subcommittee obtained the failed co-op’s most recent financial statements, and those statements show that none of the failed co-ops have repaid a single dollar, principal or interest, of the $1.2 billion in federal loans they received,” said Sen. Rob Portman (R., Ohio) in his testimony at a subcommittee hearing on Thursday.
“It is unlikely they will pay any significant fraction back,” he said. “The latest statements show that the failed co-ops’ non-loan liabilities exceed $1.13 billion—which is 93 percent greater than their reported assets, including money they expect to receive. On top of that, they owe $1.2 billion to the federal government. We should not hold our breath on repayment.”
Andy Slavitt, acting administrator for the Centers for Medicaid and Medicaid Services, said that he does not expect taxpayers will be repaid when asked by Sen. Ben Sasse (R., Neb.) what percent of the loans would be paid back.
“Do I expect we’re going to recover 95 percent or 100 percent of these loans?” asked Slavitt. “No, I don’t.”
Sasse then asked if he could expect if 10 percent would be recovered and Slavitt said he didn’t know.
“I’m thinking we need to acknowledge the utter incompetence of trying to centrally plan a program like this,” Sasse said. “The more you look at these numbers, the less plausible it is that anybody knew what they were doing when they looked at these co-ops.”
The report detailed how the Department of Health and Human Services was aware of serious problems concerning the co-ops before any loans were approved.
“Once the co-ops got going in 2014, things went south in a hurry—both in terms of financial losses and enrollment figures that wildly deviated from the co-ops’ projections,” Portman said. “But despite getting regular reports that the co-ops were hemorrhaging cash, HHS took no corrective action for over a year.”
Slavitt admitted that CoOportunity Health, which operated in both Iowa and Nebraska, should never have been allowed to continue in 2015. According to the Galen Institute, CoOportunity had total losses of nearly $168 million and was liquidated in January 2015.
“I will say to be fair as I look back about things we would have done differently, I will say that CoOportunity should never have been allowed to go into the 2015 year either by the co-op or ourselves and I think that’s a very fair criticism in looking back and I think that’s something that we would all say,” Slavitt said.
Ten of the 11 co-ops that are still in operation have reported losses, and closures are likely, according to Dr. Scott Harrington, a professor at the Wharton School who specializes in the economics and regulation of health insurance.
“The future of the 11 co-ops still providing coverage in 2016 is uncertain, but future closures seem likely,” Harrington told lawmakers at the hearing.
Harrington said only one co-op that serves Maine and New Hampshire reported positive net income. “The 10 co-ops still operating with June 30 financials reported a cumulative loss of $202.3 million.”
“Very little, if any, of the $1.24 billion in federal start-up and solvency loans to establish those co-ops will be repaid, and at least several will be unable to meet all of their obligations to policyholders and health care providers,” he said.