Two Republican Senate leaders are demanding answers from the Obama administration as to why nearly half of the 23 taxpayer-funded Obamacare insurance startups are shutting down.
Sens. Orrin Hatch of Utah and Lamar Alexander of Tennessee wrote to the administration Monday on the consumer-operated and oriented plans created by Obamacare. The senators asked what the administration has done to get back the $1 billion in loans from the 11 co-ops that will shut down by the end of the year.
“The co-ops are not living up to their expectations,” the senators said in a letter to Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, which oversees the co-ops.
The Affordable Care Act created the co-ops as a way to spur more competition on the Obamacare insurance exchanges.
However, 11 have said they will shut down due to a series of financial problems, saying they won’t offer plans in 2016. A chief reason is a lack of federal funding from a program intended to help insurers mitigate substantial losses.
“There are indications additional co-ops will close before the end of the year, bringing even greater uncertainty to the nearly 870,000 individuals enrolled in co-ops nationwide,” the letter said.
The administration gave more than $2.4 billion in loans to the 23 co-ops to help them get set up. The 11 co-ops that are closing have received more than $1 billion in federal loans, according to figures from the House Energy and Commerce Committee, which will hold a hearing on co-op management Thursday.
The senators also want information on the criteria for deciding a co-op is no longer sustainable, how CMS has dealt with the financial issues at the co-ops and what steps the agency is taking to keep competition robust.
Hatch is chairman of the Senate Finance Committee and Alexander the Senate Health, Education, Labor and Pensions Committee. Both have been staunch Obamacare opponents.
The agency said it would respond to the senators.
It has previously said that it is working to ensure access for Americans to affordable health insurance. Agency officials also have said they expected some co-ops would not survive since they are startups.
A major reason several co-ops gave for shutting down was not enough money from Obamacare’s risk corridor program, set up to pay insurers who take on too many sicker and older Americans.
Obamacare insurers requested $2.9 billion but got 12 percent of that. Experts have said the shortfall hit the co-ops hard because they started in 2014 and didn’t have many cash reserves to mitigate the impact.
