A Senate panel found that the government ignored warning signs that Obamacare co-op plans were a bad bet when it doled out $1.2 billion in taxpayer funds to them.
The report from the Senate Permanent Subcommittee on Investigations, released during a hearing Thursday, found that in 2014 the Department of Health and Human Services gave out loans to failed consumer-oriented and operated plans, called co-ops, despite clear warning signs they weren’t reliable.
The co-ops were created to spur more competition on the Obamacare exchanges. However, of the 23 taxpayer-funded co-ops, 12 have shut down.
The shutdowns mainly occurred in the fall and required hundreds of thousands of people to find new plans before theirs expired.
The report from the committee focused on a review from the consulting firm Deloitte on the co-ops’ loan applications and business plans. HHS asked the consulting firm to step in when startup loans for the failed co-ops were doled out in 2012, Sen. Rob Portman, R-Ohio, chairman of the subcommittee, said in his opening remarks.
While Deloitte gave the co-ops a “passing” grade, the firm warned HHS of several concerns. Those included many of the failed co-ops not identifying senior leadership and seven of the 12 failed co-ops having serious problems with their enrollment strategy.
Many co-ops also “submitted budgets that were incomplete, unreasonable, not cost-effective or that didn’t align with the co-op’s own financial projections,” Portman’s statement read.
However, HHS approved all of the loan applications for the failed co-ops, doling out $1.2 billion.
Many of the co-ops said the reason for their failure was a lack of government funding through the risk adjustment program, which pays out insurers for major losses.
Portman noted that while HHS had the information on the co-op problems, it “did not step in.”
Administration officials said Congress cut funding for the co-op program from the original $6 billion included in the Affordable Care Act to $2.2 billion.
Andy Slavitt, acting director of the Centers for Medicare and Medicaid Services, said in his opening statement that entering the insurance market is tricky, with multiple pressures and challenges.
He added that his team at CMS didn’t turn a “blind eye” to the co-op problems.
