This has been a rough week for Obamacare’s co-ops.
Colorado’s nonprofit co-op insurer announced Friday that it will not offer plans in 2016, the third co-op to do so in a week. The decision means that Colorado will be the seventh of 23 taxpayer-funded co-ops to shut down.
About $2 billion in government funding has been doled out to the co-ops that opened to offer more competition in the Obamacare marketplaces.
Colorado’s is shutting down because the state’s insurance regulator will decertify the insurer from the Obamacare marketplace Connect for Health.
The decision appears to be linked to financial troubles at the co-op.
Colorado said earlier this month it had expected to receive more money from the federal government under Obamacare’s risk corridor program. The program pays out money to Obamacare insurers to cover new costs for enrolling more older, sicker people under the law.
The idea is to help insurers handle added costs and if they take on too many sick patients. Insurers around the nation requested more than $2 billion for the program but only received $362 million.
The reason for the dramatic shortfall is the program has to be revenue-neutral, meaning it can’t pay out more than it takes in. Insurers are supposed to pay in to the program if their revenues reach a certain threshold.
However, not enough insurers paid in and too many insurers requested payments, leading to the shortfall.
Colorado’s co-op was supposed to get more than $10 million but said that the “federal government reneged on its obligations.” It said in a release that it could cover the shortfall.
The co-op didn’t say how much it got from the program, if anything, but noted that the decision will “jeopardize its ability to meet capital reserve requirements.”
Some co-ops have experienced similar problems. Kentucky, which announced Oct. 9 it will close down, had requested $77 million from the program but only got nearly $10 million.
Some co-ops have also had financial troubles, mainly through pricing premiums too low and not having enough money to cover medical claims.
Experts have said that some co-ops will be forced to raise their rates, but may face competition from more entrenched insurers. That could lead to financial problems.
Colorado’s co-op had 80,000 members, making it one of the largest insurers in the state. It will continue to offer coverage until Dec. 31, and urges customers to pick a new plan in the next Obamacare open enrollment that starts next month.
Kentucky and Tennessee also announced they were closing down and won’t offer plans in 2016.
