Most Obamacare Co-Ops Have Now Failed

Two co-ops went under in past week

July 12, 2016

Only a third of Obamacare co-ops are still in operation after two more co-ops announced they were closing their doors in the past week.

Connecticut’s co-op, HealthyCT, was placed under an immediate order of supervision on July 5 after being forced to pay $13.4 million for the Affordable Care Act’s risk adjustment program.

The Centers for Medicare and Medicaid Services initially awarded HealthyCT $75.8 million in June 2012, then awarded it $3.8 million in November 2013 and $48.4 million in September 2014.

"It became evident that this risk adjustment mandate would put the company under significant financial strain," said Katharine Wade, Connecticut’s insurance manager. "This order of supervision provides for an orderly run-off of the company’s claim payment under close regulatory oversight."

Three days later, the Oregon Department of Consumer and Business Services announced it would place Oregon’s Health Co-Op in receivership and liquidate the company’s assets. The co-op lost $18.4 million in 2015 due to medical claims and individual policies and owes $900,000 to pay for Obamacare’s risk adjustment program. The co-op was awarded a total of $56.7 million from the Centers for Medicare and Medicaid Services.

"We understand changing plans in the middle of the year will be difficult for Oregonians, but this action was necessary given the sudden deterioration of the company’s financial position," said Patrick Allen, director of the department. "Unfortunately, as a startup, Oregon’s Health CO-OP is not in a position to sustain these losses while meeting its obligations to policyholders."

Oregon’s Health Co-Op is the second to fail in the state since Health Republic Insurance of Oregon closed its doors last year.

The two failed co-ops in Oregon and the failed co-op in Connecticut join 12 other co-ops that have failed in Arizona, Colorado, Kentucky, Michigan, Nevada, New York, Ohio, South Carolina, Tennessee, and Utah, as well as a co-op that served both Iowa and Nebraska.

This leaves only eight co-ops in existence out of the 23 initially created under Obamacare.

A professor who specializes in economics and health insurance predicted this would happen, telling lawmakers in March that it was likely the remaining co-ops would close. At that time, there were 11 co-ops still in operation.

"The future of the 11 co-ops still providing coverage in 2016 is uncertain, but future closures seem likely," Dr. Scott Harrington, a professor at the Wharton School, told lawmakers at a Senate hearing.

Harrington said only one of the co-ops 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," Harrington said.

The Department of Health and Human Services did not respond to requests for comment about the closures.