The nonprofit Obamacare health plans that have recently failed started off from a “weak” position, the Obama administration wrote Thursday in a letter to Sen. Ben Sasse.
In response to an inquiry from Sasse about why the Department of Health and Human Services loaned about $1.2 billion to the plans, which have since shuttered, the agency provided a four-page explanation of the purpose of the plans, the type of oversight it provided and a summary of how it discovered plans in Iowa, Nebraska and Louisiana were failing.
The Nebraska Republican had asked the department to answer a number of questions about why half of the consumer operated and oriented plans, otherwise known as co-ops, have failed under financial strains. The co-ops were intended to increase competition in the new insurance marketplaces set up under the Affordable Care Act.
In its response to Sasse, HHS said it “takes its role of protecting taxpayer funds seriously” but said that like any other start-up, the co-ops weren’t assured of becoming “viable and sustainable.”
“Co-ops had no historical claims experience, lacked information on disease burden or competitive dynamics and began from a relatively weak position to set premiums and negotiate network contracts,” HHS wrote.
Sasse had previously threatened to block two of President Obama’s nominees unless the administration provided a full explanation for why it lent millions of dollars to the plans and why they failed. He said Thursday that’s still his intent because the letter provided an unsufficient response.
The HHS nominations Sasse is threatening to block presumably include Andy Slavitt to lead the Centers for Medicare and Medicaid Services and Karen DeSalvo to act as HHS’ assistant secretary.
HHS also provided Sasse with the quarterly financial filings of each of the dozen co-ops that have failed. But Sasse says he asked for, and did not receive, milestone reviews and performance certifications.
“It is essential that HHS provide a full accounting of what happened within the co-op program,” Sasse wrote.
