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Thirteen of 23 Co-Ops Created Under Obamacare Have Failed

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Ohio’s InHealth Mutual co-op announced last week that it is going out of business, making it the 13th co-op to fail out of the 23 that were created under Obamacare.

The Ohio Department of Insurance asked to liquidate the company, saying that the company was in a "hazardous financial condition." The co-op served nearly 22,000 consumers who now have 60 days to find another policy offered by another company on the federal exchange.

"Our examination of the company’s financials made it clear that the company’s losses would prevent it from paying future claims should its operations continue," said Ohio Director of Insurance Lt. Gov. Mary Taylor. "Under Ohio law, we acted with certainty to protect the consumers."

The company recorded an underwriting loss of $80 million in 2015 despite the $129 million in taxpayer-backed loans granted to the co-op by the federal government. InHealth Mutual was also placed under "enhanced oversight," one of three tools the Department of Health and Human Services has to monitor co-ops in financial distress. When a co-op is placed under enhanced oversight, it means the company is consistently underperforming and allows the department to give detailed and more frequent reviews of the loan recipient’s operations and financial status.

According to Columbus Business First, medical claims were coming in at a rate of $3 million per week and the company would have had to raise premiums by 60 percent in 2017 to keep up. If InHealth Mutual were to stay in business through the end of 2016, projections show that the company would have posted losses of $20 million.

Ohio’s failed co-op is added to the list of 12 co-ops that have already failed in Arizona, Michigan, Utah, Kentucky, New York, Nevada, Louisiana, Oregon, Colorado, Tennessee, South Carolina, and a co-op that served both Iowa and Nebraska.

Centers for Medicare and Medicaid Services chief operating officer Mandy Cohen told lawmakers in February that eight of the 11 remaining Obamacare co-ops in operation were selected for "corrective action plans" and "enhanced oversight." She did not disclose which co-ops were placed on these plans.

A professor who specializes in economics and health insurance told lawmakers in March that closures of the remaining co-ops seem likely.

"The future of the 11 co-ops still providing coverage in 2016 is uncertain, but future closures seem likely," said Dr. Scott Harrington. "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.

The Department of Health and Human Services did not respond to requests for comment by press time.