CMS Official Admits He’s Not Surprised Obamacare Co-Ops Lost Money

Senator: $1.2 billion sunk in co-ops could pay premiums for 300,000 families

Andy Slavitt
Andy Slavitt / AP
January 21, 2016

Centers for Medicare and Medicaid Services Acting Administrator Andy Slavitt admitted that he’s not surprised the Obamacare co-ops would lose money, at a Senate Finance Committee hearing on Thursday.

Sen. Orrin Hatch (R., Utah) who chairs the committee, questioned Slavitt asking why the agency would certify health care plans through the co-ops if they thought there was a good chance they would fail.

"Of the 11 co-ops still in operation, there is reason to call their long-term financial viability into question—all but two of them are losing money," Hatch said.

"And as co-ops continue moving into weaker financial conditions, several show signs of running out of money this year," he said. "Why would CMS certify these plans to sell on federal marketplace knowing there’s a good chance that these plans will fail and leave their enrollees in the lurch?"

"It doesn’t surprise me that in the first couple of years that the co-ops are going to lose money," said Slavitt. "I think most small businesses competing in this space have those investment years."

"The states, I think, reviewed very carefully with our assistance and our participation whether or not the co-ops should indeed move forward into the coming year and as a result as you know decisions were made to not allow certain co-ops to enter the year," he said. "The ones that entered the year, the states, which are the ultimate regulatory authority, with our support believed that these co-ops had the wherewithal to make it through the year."

There were 24 co-ops created under the Affordable Care Act, and more than half of those have failed, resulting in a loss of $1.2 billion in taxpayer money.

Hatch questioned Slavitt in regards to whether any of that money would be recouped. Slavitt said that there were three sources that they were looking for a source of return of funds for taxpayers.

Sen. Rob Portman (R., Ohio) said he believed none of the money has been recouped despite Slavitt’s response.

"As I look at it, it’s a program failure," Portman said. "It’s wasted up to $1.2 billion dollars in taxpayer money."

"I heard you say earlier you thought some of that money might be recouped," the senator said to Slavitt. "I would make the point that to my view, none of it’s been recouped, zero."

"These are failed enterprises, so I think saying $1.2 billion has been wasted is probably accurate," he said. "That’s enough, by the way, to pay for healthcare premiums for more than 300,000 Ohio families in one year."