HealthZette

Obamacare Co-Op Collapse

American families forced to cover risky bet of the ACA's co-ops

No one would bet their physical health and well-being, or that of their family, on a coin toss.

Yet that is what has happened, essentially, to hundreds of thousands of Americans across 13 states as a result of a failed provision of the Affordable Care Act, or Obamacare.

The chance of winning a 50-50 coin toss, in fact, is better than the odds of someone keeping their health insurance under Obamacare’s consumer operated and oriented plans, known as co-ops.

During the past year, 12 of the 23 federally approved co-ops, or 52 percent, have failed, so a coin flip would have been a better and cheaper bet. This is true especially when one considers the co-op collapse has cost taxpayers more than $1.23 billion thus far from the poorly played gamble to spur competition and affordable health care options to consumers.

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Until recently, Chris Grosso was a lifelong New York resident and owner of a small video production company just outside Syracuse. For eight years his company provided a good living for his family of five, until his monthly insurance rates rocketed by more than 150 percent earlier this year.

“Our premiums jumped to more than $2,500 a month and that became unaffordable,” he said in an interview with LifeZette. “The health care debacle is what led us to sell the business and leave New York state for Florida. Even though my business was doing well, I couldn’t afford the administration costs, higher health care premiums and taxes as a small business owner.”

“More than half a million individuals have lost their health care for a second time … We are already seeing a financial death spiral.”

Compounding that taxpayer cost is the fact that many families and individuals had no health insurance once their co-op failed.

“More than half a million individuals have lost their health care for a second time. At the very least, these patients have lost continuity of care with doctors,” said Dr. Ramin Oskoui, a renowned cardiologist and CEO of Foxhall Cardiology in Washington, D.C.

“We are already seeing a financial death spiral with the ACA, because it incentivizes people with higher health costs and larger subsidies to enroll. Premium costs rise for all, including those who are wealthier or healthier. It’s not sustainable and financial collapse is inevitable,” he told LifeZette,

The cacophony against the cost and loss of co-ops is not isolated to patients and physicians.

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“Taxpayers should not be forced to throw good money after bad,” Grace-Marie Turner said in an interview with LifeZette.

Turner is president of the Galen Institute, a not-for-profit health and tax policy research organization.

“Congress would be well advised to exercise its oversight function to ensure no additional federal dollars are wasted on the program, as well as investigate how the taxpayer loans have been spent and who will pay it back,” she said.

Congress did take notice and held two separate hearings on the co-op failures. The most recent was the Energy and Commerce Subcommittee on Oversight and Investigations earlier this month.

“Originally intended to create choice and increase competition among insurers, these co-ops were structurally flawed and were financially risky from the start,” said Rep. Tim Murphy, R-Pa., the subcommittee chairman.

Related: Doctors and Dollars

While Democrats at the hearing blamed federal budgetary cuts as a primary cause of the failed co-ops, testimony from several state insurance commissioners cited several more likely points of failure, including low enrollment rates, lack of experiential claims data, and stiff competition from established insurers.

Also testifying before the subcommittee was Gloria Jarmon, Department of Health and Human Services deputy inspector general for Audit Services at the Office of Inspector General (OIG). She cited a July OIG report that warned of the spreading co-op meltdown.

“Given the growing concerns about the financial viability of co-ops, it is critical that the Centers for Medicare and Medicaid Services provide the necessary guidance to improve program oversight and protect taxpayer dollars from significant losses,” Jarmon said.