Nearly Half of Obamacare Co-Ops Are Closing
Policy + Politics

Nearly Half of Obamacare Co-Ops Are Closing

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Nearly half of the 23 non-profit insurance plans created under Obamacare in 2011 at a cost of $2.4 billion have announced they will close by the end of the year.

Utah’s Arches Health Plan on Tuesday became the 10th health insurance co-op to announce that it was closing its doors. The move comes soon after the Obama administration’s decision on Oct. 1 to provide just 12.6 percent of the $2.87 billion that insurers were seeking to offset losses caused by unexpectedly high coverage costs.

Related: GOP Faults Obama and the ACA for Failure of Healthcare Co-ops

That decision -- to decimate funding of a “risk corridor” program designed to reimburse insurers hammered by excessive losses due to a disproportionate share of very sick or elderly enrollees -- is triggering a mass exit of these co-ops from the market.

With a new Affordable Care Act enrollment period beginning on Sunday, many of the co-ops on shaky financial ground must decide before then whether to remain in business or shut their doors.

At least thus far, the Republican-controlled Congress has proven indifferent to their plight and officials in the Department of Health and Human Services have been unwilling to intervene. As a result it is likely that other co-ops will announce they are going out of business by the end of this week. GOP lawmakers say the only solution to the problem is to scrap Obamacare and start over.

Even some senior Senate Democrats, including Sen. Chuck Schumer of New York – a state where more than 150,000 people will be losing their co-op insurance -- told The Fiscal Times last week that they were unaware of the crisis.

Last Friday, Consumers’ Choice Health Insurance Company in South Carolina announced that it, too, was going out of business – a decision that will send about 67,000 people and small businesses scrambling to find new health coverage.

Related: Obamacare Falls Short on Sign-Ups While Co-Op System Crumbles

The eight other co-ops that have announced they were closing their doors are in Colorado, Iowa, Kentucky, Louisiana, New York, Nevada, Tennessee and Oregon.

The crisis was foreshadowed earlier this year when the Centers for Medicare and Medicaid Services (CMS), which oversees Obamacare, issued warning letters to 11 of the co-ops, placing them under special scrutiny and requiring that they produce a plan of “corrective action.” A report last July by the Inspector General of the Department of Health and Human Services said that 21 of the 23 co-ops reviewed had incurred net losses between Jan. 1 and Dec. 31 in 2014. Moreover, 19 of the 23 showed net financial losses because the claims they received exceeded premium revenue.

Related: Obamacare Gap Traps Millions With Coverage Who Can’t Afford Care.

“Most of the 23 CO-OPs we reviewed had not met their initial program enrollment and profitability projections as of December 31, 2014,” the report stated. “The low enrollments and net losses might limit the ability of some CO-OPs to repay startup and solvency loans and remain viable and sustainable.”