John Morrison, one of the leaders of the CO-OP health insurer movement, said decisions by Congress and the Obama administration are partly responsible for the plans’ high failure rate.
Republicans in Congress hurt CO-OPs by cutting CO-OP loan funding, but the Obama administration hurt the CO-OPs, too, by refusing to let CO-OPs use startup and solvency loan money for marketing purposes, and by letting the Office of Management and Budget (OMB) use restrictions on CO-OP loans to keep the CO-OPs from getting a market share of more than 5 percent, Morrison testified today at a hearing organized by the House Energy & Commerce oversight subcommittee.
When the Obama administration and many states agreed to let established insurers “grandmother” existing individual and small-group policies, or policies written under the rules in effect before Jan. 1, 2014, when major PPACA benefits mandates and medical underwriting restrictions took effect, that hurt the CO-OPs in states with grandmothering, by letting established insurers hold on to the best customers and keeping those customers out of the risk pool for the new, fully PPACA-compliant policies that the CO-OPs were writing, Morrison said.
The Obama administration made matters worse by refusing to let CO-OPs limit the amount of 2014 coverage they sold through the PPACA public exchange system, even though administration rules limited the CO-OPs’ ability to raise the extra capital they would need to support unexpectedly high enrollment levels, Morrison said.
“The long knives came out to kill the CO-OPs in their cribs,” Morrison said.
Morrison is a former Montana insurance commissioner, the vice chair of the Montana Health CO-OP, and the founder of the National Alliance of State Health CO-OPs (NASHCO).
The House Energy oversight subcommittee set up the hearing to look at the recent wave of shutdown notices coming from the non-profit, member-owned Consumer Operated and Oriented Plan (CO-OP) carriers. Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the program, which provided loans for CO-OP organizers, to bridge that gap between Democrats in Congress who wanted to let consumers buy into a government-run program similar to Medicare and Democrats who wanted to maximize the role of commercial health insurers in the health finance system.
A House Ways & Means subcommittee held a CO-OP hearing earlier in the week.
CO-OP backers argued that the plans would help increase competition in the health insurance marketplace, and Morrison testified at the hearing that markets with CO-OPs in the mix have had lower average premiums than other, comparable markets.
Witnesses testified that some CO-OPs set coverage prices low, but that, on average, their prices were close to the market average, and that some CO-OPs with average or above-average prices failed because of problems with attracting enrollees.
Rep. Michael Burgess, R-Texas, said the flow of CO-OP failures that began this past summer seems to be accelerating. “The subcommittee staff struggled to finalize materials for this hearing because CO-OPs were failing, and announcing failures, faster than the staff could finalize the memorandum,” Burgess said.