Four taxpayer-funded Obamacare insurers in the last week have said they will close up shop, partly blaming a lack of support from the Obama administration.
For the remaining publicly owned insurance cooperatives, not relying on more government funding has been a key strategy for staying afloat.
Back in 2014, before the first Obamacare open enrollment period, the administration helped establish 23 co-op insurance startups. The goal was to provide more competition for the marketplace exchanges where enrollees buy insurance.
Related Story: http://www.washingtonexaminer.com/article/2574118/
But nearly a third have dropped out, with 15 co-ops remaining.
Some of the co-ops said a major reason for some of the closures was a lack of money from Obamacare’s risk corridor program, created to help insurers cover the cost of taking on more sicker, older Americans. The program expects insurers who get high profits to pay in to the program, and it pays out to insurers that suffer losses.
But the program didn’t get enough payments from insurers and received too many requests for payments. Insurers requested $2.9 billion from the federal Centers for Medicare and Medicaid Services, but only received $362 million.
For some co-ops, that was a big hit. Kentucky’s co-op shut down Oct. 9 after receiving nearly $10 million instead of the $77 million requested.
Co-ops in Iowa, Oregon, Louisiana, New York, Nevada, Tennessee and Colorado also have announced they won’t provide plans in 2016. The decisions mean that thousands of plan enrollees must pick a new carrier when Obamacare’s open enrollment starts next month.
For some co-ops that are financially stable and still offering plans, the best way to approach the risk corridor money has been to not count on it at all, especially since the program ends in 2017.
That is what Massachusetts’ Minuteman Health did. The co-op, which serves Massachusetts and New Hampshire, lacked any confidence the federal program would work, and only counted on $281,088 in payments for 2014.
The insurer said in a statement earlier this month that it deemed any risk corridor money would be a “non-admitted asset,” which they say is a “polite, insurance-speak way of saying we do not believe we will ever see the money.”
Oregon’s Health Co-Op took a look at the political climate surrounding Obamacare and “it didn’t make sense to count on that [money],” CEO Phil Jackson told the Examiner.
Jackson mentioned that Obamacare initially allocated $6 billion for the startups, but that figure was reduced over the years to about $2 billion.
Oregon has two cooperatives, Oregon Health Co-Op and Health Republic. The latter said Friday it was shutting down partly because of a risk corridor shortfall.
New Mexico’s co-op also told the Examiner that it requested a minimal amount and that the shortfall didn’t hurt its finances.
Being conservative in their finances has helped some co-ops to stay afloat.
The Montana Health Cooperative, which serves Montana and Idaho, said it has been extremely conservative in its costs and enrollment growth.
“We keep our admin costs extremely low,” said Karen Early, the co-op’s director of marketing. “We outsource everything and have fewer than 25 in staff.”
As of now, the co-op said it plans to offer plans in 2016.
Like the other co-ops, Montana was hit by the shortfall in risk corridor money, asking for $6 million and getting only $800,000.
Early said it would be great to get more money from the federal government, but it isn’t holding out any hope.
“Even without the risk corridor money next year, we expect to be profitable,” she said.
CMS, which oversees the co-ops, is aware of the problems with the risk corridor program.
“We recognize that for a limited number of insurers, a lower-than-expected 2014 risk corridor payment may raise concerns,” spokesman Ben Wakana told the Examiner Friday.
Wakana said the agency has contacted states and insurers that have concerns and will continue to work with them.
The agency has said that it expected that not all the co-ops would survive since they are startups and going into a completely new insurance market.
However, the closures have provided Republicans with new ammunition for long-standing criticisms that the healthcare law doesn’t work.
“Despite repeated Obama administration bailout attempts, this is the latest in a string of broken promises,” Senate Majority Leader Mitch McConnell said last week after news of Kentucky’s closure was released.
