Rep. Smith Op-Ed in The Wall Street Journal: ObamaCare’s Cascading Co-op Failures

imageRep. Smith Op-Ed in The Wall Street Journal: ObamaCare’s Cascading Co-op Failures

When it passed Congress in 2010, the Affordable Care Act offered substantial financial support to create nonprofit health-insurance plans. Today 11 of the 23 such regional Consumer Operated and Oriented Plans have failed—seven since the beginning of October.

They’ve collapsed despite federal startup loans totaling more than $1.1 billion. These loans will likely never be fully repaid, while insurers and consumers will be on the hook for any unpaid claims left behind by failed insurers.

Consider CoOportunity Health, which operated in Iowa and Nebraska and received a federal startup loan of $146 million. The Iowa and Nebraska Life and Health Insurance Guaranty Associations, funded by insurers in the states, have begun paying more than $80 million to cover outstanding claims to providers which CoOportunity Health was unable to pay in its insolvency.

In the summer of 2013, a self-employed woman in western Nebraska showed me her cancellation letter for a health plan she liked—a plan President Obama had promised that she, like the rest of Americans, could keep. As she shopped for a new plan, CoOportunity Health offered premiums substantially lower than the competing plans, and she signed up.

In November 2014 CoOportunity Health announced that her platinum plan would no longer be offered. She chose another plan—and not long thereafter received a third cancellation letter, notifying her the co-op was going out of business and instructing her to find a new insurance provider before the end of the open enrollment period on Feb. 15, 2015.

As a result of CoOportunity Health’s liquidation, nearly 120,000 Nebraskans and Iowans lost coverage. And that’s just one plan.

Other collapsed co-ops and their loan amounts include: $65.8 million to Louisiana Health Cooperative, $65.9 million to Nevada Health CO-OP, $265 million to Health Republic Insurance of New York, $146 million to the Kentucky Health Cooperative, $73.3 million to Tennessee’s Community Health Alliance, $72.3 million to Colorado HealthOp, $60.6 million to Health Republic Insurance of Oregon, $87.6 million to Consumers’ Choice Health Insurance Company in South Carolina, $89.7 million to Arches Health Plan in Utah, and $93.3 million to Arizona’s Meritus Health Partners.

To date, more than half a million Americans have lost coverage thanks to the failure of these co-ops. The reason? The co-ops took on far too many customers at artificially low premiums, and, as the American Enterprise Institute and the Galen Institute noted earlier this year, are drawing down “unspent loan funds to pay medical claims.”

Despite mounting failures, the Obama administration has been unwilling to change course. Politico Pro has reported that state and federal regulators let some of the co-ops “reclassify certain loans as surplus, a move that financial analysts say will make the health plans’ balance sheets look better and potentially keep them from shutting down.” In other words, to hide their debts and project false solvency—until they, too, go under.

Amid warning signs of insolvency, Tennessee’s Community Health Alliance asked for permission from the Department of Health and Human Services to suspend enrollment in January 2015. After initial stonewalling, HHS granted permission for the freeze. (CoOportunity Health had previously asked for the same permission from HHS without success.)

At a Ways and Means subcommittee hearing in June, Julie McPeak, the commissioner of the Tennessee Department of Commerce and Insurance, said HHS “certainly had a differing opinion about the financial stability of the company.” On Oct. 14 the Community Health Alliance announced that it will not offer coverage for 2016.

With $2.4 billion in loans on the line for the 23 original plans, the co-op program leaves many questions unanswered. Ways and Means Committee colleagues recently joined me in sending a letter to the Centers for Medicare and Medicaid Services (CMS) seeking more information on the financial solvency of the remaining plans.

On Tuesday the committee is holding a hearing with Dr. Mandy Cohen, CMS chief of staff. These inquiries follow my multiple requests to HHS and CMS seeking substantive answers on why there was not more oversight of these co-ops, and what these agencies are doing to prevent further damage. I continue to await this information.

Meanwhile, I have introduced H.R. 954 to exempt consumers who purchased coverage under a terminated qualified health plan funded through the co-op program from having to pay individual-mandate penalties through the end of the calendar year or, for plans that fold in the final quarter of the year, through the end of the next calendar year. Americans should not be penalized under a law when the law’s own failed program prevented compliance.

Mr. Smith is a Republican congressman from Nebraska and a member of the Ways and Means health subcommittee.

Click here to read Rep. Smith’s op-ed online at The Wall Street Journal.

44 comments

  1. Anonymous says:

    H.R. 954 may help those coming out of failed co-op plans, but what will help them get into new plans? Does Rep. Smith have a plan?

  2. Ben Sasse says:

    Hey wait a minute…..I was the first one to point this out. OH, and tune in for my FIRST speech ever on the Senate floor today. All of America will be watching.

  3. Sparkles says:

    Exactly what one would expect.
    Full of sound and fury, signifying nothing.

    H.R. 954 was was Introduced by Mr. Smith on February 12, 2015.
    It was introduced into the House Ways and Means Committee.
    The House Committee on Ways and Means is the Republican controlled committee chaired, until last Friday, by Republican Paul Ryan.
    Here’s is the report, as of today. of the latest action on Mr. Smith’s bill, on the part of the Republican controlled House Ways & Means committee, chaired by Congressman Ryan –
    “Latest Action: 02/12/2015 Referred to the House Committee on Ways and Means”

    Of course the real tragedy is – Congressman Smith proposed a bill to address the roughly $80 to $150 penalty an individual or family may incur (prorated for the few waning months of the year) for not having health insurance.
    “The annual fee for not having insurance in 2015 is $325 per adult and $162.50 per child (up to $975 for a family), or it’s 2% of your household income above the tax return filing threshold for your filing status – whichever is greater.”

    Apparently Mr. Smith believes that what is keeping Mom and Pop Lunchpail up at nights is that oppressive $100 penalty looming on horizon from our Socialist leaning Big Gubmint, courtesy of the unconstitutional actions of our Imperial President.
    The fact that this individual or family may suffer from chronic illness or have significant health needs – yet now has no insurance – is a problem for which Mr. Smith offers no solution.
    It’s a problem the for which the Republican party has offered no solution of significance for 5 years. (of course, the ACA was a product of the Heritage Foundation, but that before it was overrun by our modern day teahadists)

    Yet the pandering and political posturing, such as H.R. 954, never ends.

    Too bad pandering doesn’t pay for blood pressure pills or annual check-ups or a myriad of preventative medicines and care that would improve the lives our countless millions and in the process save our nation hundreds of billions of dollars over the long term.

  4. Sparkeles: “Pay no attention to our own looming disaster; here’s how Rep. Smith should have made the same mistakes we did.”

    And it’s a load of lying ballocks, in any case. I’m the world’s biggest fan of screening and preventive care, but no health economist thinks it saves money (save for a few things such as vaccines).

  5. Oracle says:

    GH has often promulgated the view that preventive care saves no money (but then immediately makes an exception to that statement). Google: “Prevention Saves Lives as Well as Money, New Research Confirms” for a different view. And sometimes benefits can’t always be objectified in dollars and cents. One’s quality of life when improved due to preventive care will not show up on a balance sheet.

  6. Sparkles says:

    Oracle,

    As you’re well aware, there are volumes upon volumes of research proving that myriad number of preventative services and medicines save money.

    Of course, not all screenings and not all drugs provide immediate economic benefit. As science and research methods have evolved, some have proven over time to be of no benefit, maybe even deleterious.
    But in free market, folks are allowed to spend their coins on whatever it is that may buy them piece of mind.
    Why in fact, if you have enough coin, I hear both Dr. Ben Carson and Gov. Mike Huckabee each know of herbal remedies promised to cure both diabetes and cancer!

    Also, in conjunction with the roll out of the ACA, the Obama Administration, along with HHS and the Centers for Medicare and Medicaid, made significant and concerted efforts to reign in outright fraud and abuse, wasteful spending and cut down on services that have proven to provide marginal benefit.
    A recent example was the new mammogram screening recommendation (data shows efficacy at age 50 rather than 40) issued by the United States Preventive Services Task Force, a panel of independent health experts. (a task force created in 1984)
    That recommendation was met with:
    “Republicans Say Cancer Screening Guidelines Portend Medical Rationing”

    Or from Ben Sasse’s favorite right wing think tank, AEI
    “The Bleeding Edge of Rationing.. Obama’s health plan and the new power of the United States Preventive Services Task Force”

  7. Times Change says:

    It’s refreshing to see that Adrian has managed to hire a ghost writer with a few basic language skills. I wonder how much the tax payers are paying for it?

    Adrian had a well deserved reputation for not being able to string four words together to make a complete sentence when he was in the Legislature.

    Texas Annie is constantly complaining that the political class running Nebraska have done a pathetically bad job of providing services to the developmentally disabled citizens of the state. I hope she can take some comfort in knowing that on the federal level the government is at least providing the necessary resources for a few of our citizens with disabilities.

  8. Bluejay says:

    Dems want Obamacare to fail so they can implement single payer.

    And didn’t professor Gruber’s econometric models predict this would work great?

  9. Mike Boyle's Boy says:

    Hey, anyone see what happened down at Douglas County today? We have a new County Clerk without any search or application process. Another prominent Democrat family inserts a person into a job in County government

  10. Sparkles says:

    New Pew poll on religion released today.
    A couple interesting findings.

    21% of Americans identify as Catholic. (both self identified R and D, clock in at 21%)
    23% of Americans identify as atheist, agnostic or “nothing in particular”.
    (up from 16% in 2007)

    The share of Americans who say they are “absolutely certain” God exists has dropped from 71% in 2007 to 63% in 2014.

    Despite this decline in religious belief/affiliation, the percent of Americans who “regularly feel spiritual peace and a sense of wonder” has increased, from 52% in ’07 to 59% in ’14.

    The percent who concur: “Religion is very important in their lives”
    67% – Silent Generation
    59% – Boomer
    53% – Gen X
    44% – Older Millennials (’81 – ’89)
    38% – Younger Millennials (’90 – ’96)

    70% of Catholics concur; “homosexuality should be accepted by society”.

  11. Thank you says:

    Sparkles, for pasting the results of poll that nobody here really cares much about and for not posting the source. Now if only somebody would take away your keyboard.

  12. bynd says:

    Sparkles,

    As to your numbers. Wouldn’t Obama die for such high ratings. Looks like God wins again. He never promised all would be saved. It’s a choice thing.

    And once again, right on cue, you wonder why the Repubs don’t have an answer to the failures of the Dems health plan. I mean really, first you ridicule their intelligence and then ask why they can not help the more intellectually deficient Dems out? Religious zealots have absolutely nothing on partisan zealots when it comes to rabid stupidity.

  13. repentinglawyer says:

    Bynd, We are allowed to hope that all will be saved, but we are not allowed to presume are own salvation, or as St. Edith Stein put it, “We cannot believe that God will break free will, but we are allowed to hope He will out smart it.”

  14. repentinglawyer says:

    Prof GH, knew what term meant, English police procedurals, had not seen spelling. Lot of other across the pond abuse you might throw in.

  15. bynd says:

    Sparkles:

    If they believe that homosexuality should be accepted by society, then they are not Catholic. If they believe that homosexuals should be accepted by society, then they may be. Maybe you should stay away from that you have absolutely no knowledge about.

  16. bynd says:

    RL:
    I like it.
    But as the Bible states, not only has he out smarted it he, “he has over come it.” It is up to us to choose wisely. Bird feces or white robe.

  17. “And sometimes benefits can’t always be objectified in dollars and cents. One’s quality of life when improved due to preventive care will not show up on a balance sheet.”

    Neither point would I disagree with. I said I’m a huge fan of preventive care. Its point is to extend your life and avoid a painful death, not to save the gummint or anyone else money. That’s why I spend my own money on it.

  18. I see the Horrical was weaseling again. His source (from an advocacy group, natch) says preventive care CAN save money. Indeed; if it’s daily aspirin, vaccines, or a few other things. I said that.

    On the other hand, for example, colonoscopies at age 50 do not save money; this is why the British NHS won’t provide them. Me, I say have the colonoscopy even though on average the costs exceed the monetary benefits. After all, the entire purpose of having money is to exchange it for valuable things that aren’t money. Not dying of bowel cancer is a valuable thing, and one should be more than happy to pay for it.

  19. This is a reasonable layperson’s summary of the economics of preventive care: Google “Think preventive medicine will save money? Think again”

    There is also a substantial technical economic literature, none of which either Sparkles or Oracle have read.

  20. Horrical says:

    Hmm, careful reading is not your strong point, GH. I never claimed massive savings due to preventive medicine. I did agree with you that there are some savings (save for a few things…). I also mentioned that benefits cannot always be measured in dollars and cents (i.e. quality of life). Your google reference backs me up.

  21. Bluejay says:

    GH

    Exact Sciences of Madison, WI is working on the approval of a cheaper and non-invasive prelim colon cancer test. FDA jerking it around right now.

  22. repentinglawyer says:

    Prof GH. Colonoscopy probably should not be called preventive, potential early diagnosis should be in a separate category where the problem of false positives and additional tests or procedures arises, flap about test for prostate cancer in old guys. Also there is an age cut off for colonoscopy in current guide lines, though you can have one if you can afford it. Perhaps HST was right about a one handed economist, and we ought to recognize that money is a rationing device as is time in single provider systems.

  23. To Mike Boyle's Boy says:

    This guy is not even qualified to hold the job. He is not even the deputy of the office. Why did the County Board not ask for applications?

  24. Anonymous says:

    Utter stupidity posted here! We start with the inane judgment of the RWP, “The death spiral continues.” What death spiral? Has anyone, besides RWP and his yes-man RL, detected a death spiral? Where’s Macdaddy? Usually he’s right here reinforcing RWP’s bombastic pronouncements.

    And as we move on to the latest thing we can Google quickly, we learn that preventative medicine may or may not be economically worthwhile, that Sparkles believes the Republicans should have a replacement plan if they want to eliminate the ACA, and that RWP continues to believe his publicly provided health care should not be extended to those not getting any. The RWP believes this is justice because he negotiated his public benefits, while low-income workers did not.

    Then Sparkles says religious fervor may be fading.

    And then the RWP claims that he really said preventative medicine does work (when he clearly said it doesn’t) via the literature that HE reads. And finally the RL says colonoscopy should not be considered preventative but diagnostic, and that the ability to buy healthcare or not is a form of rationing. Duh. We are all a little bit stupider now that we have read these farcical opinions.

  25. What is preventive medicine? says:

    Preventive medicine is practiced by all physicians to keep their patients healthy. It is also a unique medical specialty recognized by the American Board of Medical Specialties. (American College of Preventative Medicine.)

  26. TexasAnnie says:

    Times Change: I agree, about Adrian. When he first came into the unicam, 1999, I approached him with my grievance about those DD children who were not permitted to enroll in public school. Note that I was asking him to perform his constitutional duty. His response: he counseled me that I needed to go to church! True story. Maybe he has matured politically by now, but you know what they say about first impressions… And besides, federal SPED funding has never been provided to the states as stipulated by federal law. And Adrian sits in a prime seat for addressing this issue, too!

    If you think I am satisfied the feds provide adequate DD services, WAAAT? I don’t agree with that. When those DD kids were being denied their “free and appropriate” education under federal law, I did take my grievance to my federal representatives. Chuck Hagel simply quoted the 10th amendment. And while Lee Terry was seeking special funding for the Bellevue schools (one of the school districts denying DD enrollment) to subsidize the impact of the military base there, he would not act on behalf of federal special education law.

    Times Change, even if the feds fully fund their portion of Medicaid (doubtful) and if the ACA stands the latest court challenges and the next presidential election, medical care is still not enough. The DD population needs educational and recreational venues too. They need job-creation, transportation and accessibility. Just like non-disabled people. Do I say that the feds should be paying for all that? Only to the extent that the feds are already paying for those venues to the benefit of the non-disabled. Federal money does flow into cities, counties, schools, hospitals, etc. Yet somehow, it fails to trickle-down to the very least able and most vulnerable among us: the DD population in the custody of the state. (Note this final sentiment does include my adult but infantile child. She has her parents.)

  27. Better you have gone to bed, 2:16 a.m., than pollute this site with your moronity. I suggest you read Kevin Williamson’s piece in this morning’s National Review. ObamaCare is in a zombie state; it just awaits a finishing cut from Michonne’s katana.

    Your personal attack shite is tired. I do a job, and benefits are part of my compensation. That makes one of us, I expect.

    Don’t drink before you post, is my advice.

    • TexasAnnie aka D'Anne says:

      [Hey, this ‘Reply’ feature might be very useful:]

      What did 2:16am say about you, that isn’t true? Or, to phrase it differently, what is the source of your ire? You did assert a death spiral, and it is common knowledge that you, as a “conservative” want to conserve all those tax and benefit advantages that you enjoy, while protesting vehemently against a possibility of extending publicly-funded assets to everyone else.

      This is a BIG difference between you and I. I do not seek any tax advantage or public assistance that I am not willing to extend to EVERYONE, disabled or otherwise… My pivotal value is equity. Your’s appears to be one-up-manship! And you act like Donald Trump! You dish it out, but you can’t take it. And that’s a shame. Because you might otherwise have something worthwhile to share with others…

  28. repentinglawyer says:

    Anon at 2:16, If you are surprised that the price system is a rationing device, I am surprised at your surprise. With particular regard to health care obviously ability to pay and other needs for money limit access to health care, so a private purchase system rations through limiting access.
    Since I said nothing about a death spiral. I do not know how I became a yes man on the issue. Doubt RWP would see me as a yes man since I am very dubious of neoAustrian economics and doubt that pure market models will work in health care.
    Should have taken Bynd’s advice.

  29. Commenters!
    Let me know if you would be in favor, or not, of “nested” comments.
    I’m wondering if some of the “conversations” here are getting too unwieldy.
    The idea of “nested” is that if you reply to a certain comment, it would be indented underneath that comments.
    The only problem comes when you’d responding and responding and responding, and your indent turns into a centimeter of width and runs down the page. Such is the internets.
    Nonetheless, let me know your thoughts:
    YES – nested comments; or
    NO – nested comments
    Thanks!
    -Ed.

  30. Anonymous says:

    Smith. Another Republican working to improve Obamacare, which at its core is an impossible dry insertion of socialized medicine up the bum of free enterprise, all of which was hobbled together by Democrats who have law degrees atop an arts BA. People who cannot do math and who set policy leading with their heart not head. Dangerously stupid egoistical idiots. And Smith has a fix for that. He stinks like rest of the GOP co-opters of Liberal PC foolishness. Maybe less stupid, on a personal level, than Fartingberries’ endorsement of Carly “toast” Fiorina. But stupid nevertheless.

    Americans want healthcare. They elected it twice. They don’t care what form but they want it to work. Democrats produced in Obamacare something that in any form cannot work. Its cancerous and bandaids won’t help. You need to through it out and produce something rational. But there is profit to be had, politically, in Dem creating unworkable bureaucracy and Republicans selling baindaids for it..

    Trump is going to run through these people like shit through a goose. No wonder they fear him.

  31. repentinglawyer says:

    Anon at 11:46, My poor old BA in econ and my law degree wonder how much free enterprise is involved in a system where gov pays about half the bills and more if you treat non taxing of benefits as gov. spending. In addition insurance in its current form is a market imperfection since most costs do not fall on consumer. If you want a free enterprise system you would have to limit health insurance to something like catastrophe insurance.
    Interestingly American health care is only clearly best in the World for those over 65 and dramatically so for those over 70. If Medicare is not socialized medicine what is it?

  32. Lil Mac says:

    SS. Perhaps a better question is whether a political blog is a proper place for endless squabbling where snarky one-upmanship evolves into a culture of gotcha rather than a presentation and countering of fact and reason. Reasoned debate points are limited. Pointless snark can be endless.

    Unlimited “nesting” may wreak havoc on the blog presentation before it limits snark. Thus in the spirit of limiting the banter to a statement, a counter statement and a retort, can the nesting perhaps be limited to three comments and then the axe is automatically dropped on that nest?

    If endless bickering is sought, those who seek it should get married and use frying pans on each other.

    Humor aside, it is not healthy to encourage voters to become less rational, less focused and more snarky. This blog is already a buffet where people pig out on snark. Make them order off a menu and get one plateful. They will quickly learn to load up on meat.

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