Obamacare Co-Op Projects $39 Million Loss, Citing Problems With Risk Adjustment Program

Just 5 of 23 original co-ops still offer Obamacare plans

Getty Images

One of five health insurance co-ops that are still offering Obamacare plans this year projected a $39 million loss, citing challenges with Obamacare's risk-adjustment program.

Obamacare originally created 23 co-ops that received $2.4 billion in taxpayer-funded loans. Eighteen of the 23 co-ops have either gone out of business or are not offering Obamacare plans this year, with many citing financial losses.

Minuteman Health, one of the remaining co-ops serving New Hampshire and Massachusetts, projeted losses of $39 million in its 2016 annual financial statement. The projected loss is driven by the federal government's risk adjustment program, which is designed to transfer money from insurers with healthier, less expensive patients to insurers with sicker, more expensive patients. The federal government is charging Minuteman Health $29.8 million and $23.7 million for its projected risk adjustment payments in 2016-17, respectively.

David Rutz breaks down the most important news about the enemies of freedom, here and around the world, in this comprehensive morning newsletter.

Sign up here and stay informed!

The co-op reported serious losses despite increasing its membership by 12,438 over a year and adding health care providers to its network. The co-op said its greatest challenge is Obamacare's risk adjustment program, which it said punishes smaller, more efficient carriers.

"We are seeing the results of this flawed formula every day," Minuteman Health CEO Tom Policelli said. "It goes directly against the public policy goals shared by all—making health care more affordable and covering more people."

"It penalizes lower-cost solutions of any kind," he said. "Even when individuals or small companies buy Bronze or Silver plans because that is what they can afford or chose to buy, they are penalized and forced to subsidize those who choose Gold and Platinum plans."

Policelli said that while the media is focused largely on pharmaceutical costs, risk adjustment costs are higher and more volatile.

"That uncertainty drives premiums higher than they should be, directly harming the small employers and individuals who are trying to afford coverage," he said.

The co-op has taken steps to revise the risk-adjustment formula, filing a lawsuit against the government and creating a national association of health insurers to advocate for improvements to the program.