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Nearly Half of Obamacare Co-Ops Have Failed

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Utah’s Arches is the latest co-op to fail, along with others in Kentucky, New York, Nevada, Louisiana, Oregon, Colorado, Tennessee, South Carolina and a co-op that served both Iowa and Nebraska

Expert: $1.1 billion in taxpayer dollars lost after 10 of 23 co-ops go out of business

Ten of the 23 health insurance co-ops created under Obamacare have gone out of business, and experts say more will follow.

Utah’s Arches is the latest co-op to fail, along with others in Kentucky, New York, Nevada, Louisiana, Oregon, Colorado, Tennessee, South Carolina and a co-op that served both Iowa and Nebraska.

Experts say that the co-ops are failing because of artificially low premiums, strict regulations, and too many people requiring payouts.

“In most cases, they priced too low relative to what their claims costs were going to be, that’s what the operating margins were all about,” said Thomas Miller, a fellow specializing in health care policy at the American Enterprise Institute.

“Now what made them attractive was they’re offering lower premiums so more people want to sign up for that, but that’s a dangerous proposition where you’re making up your losses on volume,” Miller explains. “You’re getting more people, but those extra enrollees you’re bringing in are being underwritten at a loss.”

“The co-ops are losing more than they’re bringing in because they’re paying out for older, sicker populations and don’t have enough younger, healthier people to help share the cost burden,” says Nathan Nascimento, a senior policy adviser at Freedom Partners. “This is in part because the monthly premiums set up by the co-ops were set artificially low compared to other plans.”

“Co-op insurers are heavily subsidized and operate under strict regulations,” he explains. “They’re more heavily regulated than other insurance plans offered in the health care exchange.”

“When you have artificially low premiums, a pool of people requiring more payouts, increased regulations, and reductions in risk corridor subsidies, it’s the perfect storm of insolvency,” he said. “They’re a public option comprise concept that clearly does not work – a thought experiment that is not practical in reality.”

Akash Chougule, deputy director of policy at Americans for Prosperity, says that as costs continue to rise, less people will enroll, causing more co-ops to go out of business.

“It doesn’t require an advanced degree in economics to see why this is unsustainable,” explains Chougule. “As costs and premiums continue to increase, people will increasingly avoid enrolling. And as co-ops succumb to the reality of higher rates, they’ll continue failing at their alarming pace.”

“More co-ops will likely fail – they were doomed from the start,” said Nascimento. “We’re already seeing another co-op collapse, this time in Utah, with 66,000 people losing their health care coverage and costing taxpayers more money – $89,650,303 to be exact.”

“With the now collapse of Utah’s Co-Op, Arches, well over $1.1 billion in taxpayer dollars has been lost to ten failed co-ops under the Affordable Care Act,” he said.

An official at the Department of Health and Human Services (HHS) wouldn’t rule out that more co-ops may fail in the future. “If a co-op has solvency issues, and we cannot rule out that others may this year, we will work with the states so that consumers have affordable options on the marketplace,” said Aaron Albright, an HHS spokesman. “As a startup business, we recognize not all will succeed.”

With more co-ops closing their doors, consumers will have fewer choices and may have to pay more out of pocket or risk being penalized by the federal government.

“The closure of the co-ops will most certainly lead to higher costs for people,” says Nascimento. “People kicked off the co-ops will now be mandated to choose a new health care plan and potentially one they turned down previously due to higher costs.”

“People may also be forced to lose their current doctor because they are out-of-network, or they will have to pay even more out of their pockets to stay with their current doctor,” he said.

According to the Iowa Insurance Division, “Your coverage with CoOpportunity Health will stop, and claims will not be paid after cancellation. If you do not purchase replacement insurance, you may be penalized by the federal government.”

A proponent of the co-ops, the former North Dakota senator Kent Conrad, said they were “sabotaged.”

(Washington Free Beacon)

Ali Meyer

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