(Bloomberg) — A startup insurance company loaned $145 million by the U.S. government under Obamacare is running out of money and being taken over by state officials in Iowa.
The company, CoOportunity Health, which also serves Nebraska, was placed under Iowa Insurance Commissioner Nick Gerhart’s supervision this week and is no longer accepting new enrollees, according to a statement from his office. While Gerhart’s agency will operate the company for the time being, it’s urging policyholders to seek a new insurer.
CoOportunity Health is a CO-OP, or Consumer Operated and Oriented Plan, one of 23 nonprofit health insurers providing coverage in 26 states. They were created under the Patient Protection and Affordable Care Act (PPACA) to increase competition. PPACA opponents have argued that the CO-OP program may waste government money.
CoOportunity now has 96,350 enrollees, up from 63,000 at the end of March, according to its website. The Centers for Medicare & Medicaid Services (CMS) provided the insurer with $131 million in funding for solvency and $15.4 million for operations, according to a legal filing by Gerhart. CMS told CoOportunity Dec. 16 it couldn’t provide more funds. The insurer lost $46 million from January to October, according to the petition.
“CoOportunity is not insolvent on a statutory basis at this time, but CoOportunity’s lack of additional solvency funding places it in a financially hazardous condition,” the petition said.
CMS, the Iowa Insurance Division and CoOportunity didn’t immediately respond to phone and e-mail messages seeking comment.
Rep. Darrell Issa, R-Calif., the outgoing head of the U.S. House Oversight and Government Reform Committee, predicted last year that five CO-OPs that received $2 billion in loans under PPACA would fail, either because of financial problems or regulatory shortcomings. CoOpportunity was not on Issa’s list. A CO-OP in Vermont was on the Issa list. That CO-OP failed after CMS withdrew its loans.
Executives at traditional insurers have suggested that some CO-OPs may be charging unsustainably low rates. One question has been whether the new PPACA reinsurance, risk corridors and risk-adjustment risk management programs will work the way the CO-OP organizers expected. Iowa officials note in their announcement of the CoOportunity action that the company now believes it may now be able to get any PPACA risk program cash for 2014 until the second half of 2015.
People who enrolled in CoOportunity on or before Dec. 15 will still have insurance from the CO-OP. Anyone who enrolled after will need to choose a new plan by the end of open enrollment Feb. 15, according to the Iowa Insurance Division.
“Most policyholders may find it in their best interests to find other coverage before the end of open enrollment,” officials said on the division website.