July was a tough month for the Obamacare co-ops, of which three more closed due to running out of money. A few weeks ago, Illinois’ Land of Lincoln Health announced that they would be closing their doors due to financial losses. July 31st was the deadline for Oregon’s Health co-op’s 23,000 members to find new coverage, while Connecticut’s HealthyCT has given its 54,000 members until December 31 to find new insurance. In all, 17 of the 23 original Obamacare exchanges have already been shut down. The seven co-ops that are still afloat are seeing negative profit margins, and it is doubtful that all of them will make it through the end of the year.
The total amount of federal loans given to the failed non-profit insurers has reached over $1.7 billion. That’s a high price to pay for a government-run program that was doomed to fail right from the start. Obamacare established 23 co-ops by pouring in $2.4 billion dollars of start-up loans and solvency grants. Taxpayers had been given reassurances that all of the co-op applicants had gone through a rigorous screening process to ensure their “high probability of financial viability.”
The not-for-profit co-ops were expected to provide efficient and affordable health insurance in rural areas that are typically hard to ensure. Unfortunately, the hype did not match up with reality from the very beginning.
One of the co-ops that had gone through the federal government’s “rigorous” screening process was set to open in Vermont with $33 million dollars worth of debt. However, after reviewing the co-op’s application and business plan, Vermont’s Division of Insurance Commissioner, Susan L. Donegan made the very unpopular decision to refuse to license the co-op. She believed there were optimistic and questionable forecasts, a board filled with friends, sweetheart deals, high salaries, deep conflicts of interest, and a staff with little business expertise.
While Vermont rightly determined that the co-op’s model was not sustainable, Iowa and Nebraska trusted the federal government’s screening process and ran with it. They jumped into the co-op game with CoOportunity Health and accepted $145 million dollars worth of loans. In less than a year, the co-op closed down after burning through all of the money and leaving over 90,000 people without insurance.
Iowa and Nebraska were not alone. By July 2015, the Department of Health and Human Services Inspector General reported that all but one co-op was losing money. Over half of the co-ops had losses in excess of $15 million in just the first year. It was also reported that contrary to the original co-op goals of affordable insurance, many of the co-ops had set premiums higher than their for-profit competitors.
By October 2015, eight more co-ops were forced to close as a result of hazardous financial conditions. At this point, around 800,000 people had been shut out of their plans and forced to find new insurance.
As Obamacare continues to fall apart, people are finding fewer and fewer insurance exchange options available. Connecticut’s exchange only has two insurers left, and both are planning a double-digit premium increase in the coming year. Oregon residents now have to turn to the federal healthcare.gov website for coverage since their state’s exchange closed in less than a year after it opened. Oregonians are still dealing with the shock and disappointment from the criminal investigation into their four-term governor John Kitzhaber. Reports detail that Kitzhaber intentionally allowed his state’s exchange to fail and then redirected the $305 million in federal healthcare funds into his re-election funds.
The final blow for many of the remaining co-ops came once the risk adjustment numbers were posted. The original intent of the risk adjustment program was to redistribute the profits of successful co-ops and hand the money over to co-ops with greater losses. However, since almost every co-op has lost money, the risk adjustment program has become just another form of unexplainable torment for the floundering insurers.
HealthyCT had been teetering on the edge for months. Once the exchange received news of their $13.4 million risk adjustment payment, the decision was quickly made to close down. Similarly, Oregon’s health co-op had counted on receiving a risk adjustment payment to help them pull out of the $18 million dollar hole they were in. Instead of help, they received a bill for $900,000, putting an end to any hope of the co-op remaining open. Illinois’ Land of Lincoln was already down $91 million in 2015, but it then received an additional risk adjustment bill for $32 million.
The failure of the co-ops is probably just the start of Obamacare’s demise. Obamacare is either one of the worst social experiments of all time, or a shrewd move to force Americans to accept a single-payer option once the whole program implodes. Reading about one failure after another makes one wonder how long it will take for out-of-touch liberals to admit that the healthcare program is not the overwhelming success that they have claimed all along.