Politico Pro: CO-OP program reeling after fiscal cliff cuts

If half of the states do not have Health Exchanges and the government forces people to purchase private health insurance – what does that mean? It means that the health insurers are going to make windfall profits on Federal Funds. This is bad politics, bad economics, bad health care delivery & financing and it is another step toward a Single Payer system. What a bunch of con artists!

CO-OP program reeling after fiscal cliff cuts

By Brett Norman

1/3/13 3:29 PM EST

Never mind the public option.

Now more than half the country won’t even have a chance to choose the backup, nonprofit health insurance cooperatives that took the place of the controversial public option in the federal health care law.

The fiscal cliff deal left most of the Affordable Care Act unscathed, but it cut all remaining funding — potentially billions of dollars in loans — for any Consumer Operated and Oriented Plans beyond the 24 that have already been approved.

That means there will be no money available for more than two dozen applications just filed ahead of a Dec. 31 deadline, several from already approved CO-OP sponsors that were strongly encouraged by CCIIO officials to expand into other states, CO-OP supporters said.

The applicants were blindsided by news of the deal. They’d had indications from CCIIO officials the week before that the program was humming along, not in the cross-hairs of the year-end fiscal talks, said Richard Miltenberger, a board member of the Montana Health CO-OP who had submitted applications along with partners for CO-OPs in four other states.

Although the cut could take billions in loans off the table, the Congressional Budget Office projects that the move will only save $200 million, because the CO-OPs are expected to repay most of the funds.

Republicans have criticized the program as Solyndra-like giveaways to supporters of the Obama administration. But CO-OP supporters believe the real objection comes from commercial health insurers leery of new competition.

“This was a deal that was done quickly and quietly in the dark for reasons other than saving money,” John Morrison, president of the National Alliance of State Health Cooperatives, told POLITICO. The cut, he added, was “about the health insurance giants attempting to eliminate competition at the expense of millions of Americans who will pay higher premiums due to a lack of competition.”

Funded by $6 billion in the ACA, the CO-OP program had already been cut to $3.4 billion in prior budget negotiations. So far, about $2 billion has been dedicated to 24 CO-OPs in 24 states, and the fiscal cliff deal will not impact those commitments, Morrison said.

The last CO-OP approval came in December for the Land of Lincoln Health in Illinois, which will draw on $160 million in loans.

Groups all over the country had rushed to complete their applications ahead of the year-end deadline and are now left holding the bag, Miltenberger said. Just the actuarial analysis, provided by Milliman, cost $50,000 to $60,000 per application, he said.

“People had spent millions of dollars and thousands of hours to meet the terms of the funding opportunity announcement, relying on the government’s word, only to find out that there was no opportunity after all,” Morrison told POLITICO. “There’s a fundamental fairness issue here.”

Jerry Dworak, president and CEO of the Montana Health CO-OP, which was licensed as an insurer in that state last month and will be open for business when open enrollment starts in October, said he had filed an application to expand into Idaho and Wyoming.

“We were optimistic that we could get this thing done,” he said. “Everything we’ve submitted shows that we had the best way of approaching it.”

Without the federal financing, however, it would be very difficult to launch new CO-OPs, he said.

“We’d love to, but it’s a pretty high bar to become an insurance company,” Dworak said. “You need a lot of money to do that, and the government was willing to loan that money out. I don’t know how we could do it otherwise.”

The idea behind CO-OPs, initially pitched by then-Sen. Kent Conrad (D-N.D.) and backed by Sen. Max Baucus (D-Mont.), was to finance customer-owned insurance plans that were required to plow any earnings into improved services or lower premiums for their members, as an alternative to the for-profit commercial insurers that dominate most markets.

A Baucus aide said the Senate Finance Committee chairman was “disappointed” that CO-OP funding was cut and that he would “continue fighting for CO-OPs and increased access to high-quality, affordable health care.” CMS declined to answer questions about how it planned to move forward with the program.

The fiscal cliff deal supplies 10 percent of the remaining funds to administer the program for those CO-OPs that have already been approved.

To view online:

National Alliance of State Health CO-OPs (NASHCO)

PO Box 604 | Washington, DC 20044


About this entry