ObamaCare's $147 Million Iowa Co-Op Failure Is Just The First
Investor's Business Daily ^ | 08/06/2015 | Staff
Bankruptcy: A court filing this week shows that the first ObamaCare-created insurance co-op to fail will likely cost $147 million. How many more will have to go under before President Obama admits to this boondoggle?
But then CoOportunity hit a kind of perfect storm, says
Peter Damiano, director of the University of Iowa's public policy center. First, the co-op had to pay a lot more medical bills than those in charge expected.
"CoOportunity Health's pool of people was larger than expected, was sicker than expected," Damiano says. "So their risk became much greater than the funds that were available."
The reason the co-op's customers were sicker has a lot to do with what the insurance market looked like in Iowa before Obamacare. The largest insurer by far in the state was and still is Wellmark. But Wellmark decided not to offer any plans on Iowa's health exchange, leaving just CoOportunity and one other insurer — Coventry — offering plans on the exchange throughout the state.
On top of that, when the Obama administration in late 2013 allowed people to keep the insurance plan they already had, many customers happy with Wellmark stayed put. Damiano says this meant many of the customers who flocked to CoOportunity tended to be like Fairchild — people with expensive health problems who'd had trouble paying for insurance before, in the market Wellmark dominated.
"It was always going to be a challenging market to try to reach," says Damiano, "and on top of that, the whole idea of co-ops was relatively new and experimental.
But it was to try to create competition, on that private sector approach," says Damiano.
Not only were the patients sicker, but CoOportunity's leaders initially thought they would enroll
about 12,000 people in Iowa and Nebraska.
They got about 10 times that, according to Nick Gerhart, Iowa's insurance commissioner.
Also, Gerhart says,
the co-op thought it was going to get more federal money.
"On Dec. 16 around 4 o'clock we were informed they weren't going to get any further funding," he says. "Nothing was pulled — it just wasn't extended further."
Gerhart is now essentially the CEO of the co-op because the state has taken it over. He likens the situation to a small business suddenly having its credit shut off by the bank. Even though CoOportunity is not officially dead yet, Gerhart is telling its customers to switch insurers.
He says it's too early to make predictions about the fate for all co-ops.
"The news about CoOportunity Health is not a statement on the health insurance co-op program or the co-op concept. It's a reflection on the fact that all insurers — not just co-ops — are operating in unique markets with unique business plans and varying state regulations.
The circumstances for CoOportunity Health in Iowa are not the same as those in the 23 other states in which co-ops are currently operating."
"I mean the whole Affordable Care Act is [about] competition between insurance companies, and now we're back down to what?" says Peterson.
For them, only one option: Coventry.
Health Insurance Startup Collapses In Iowa
