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Life Health > Health Insurance

CO-OP exec: 'The long knives came out' [With video]

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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.

See also: Lawmakers play PPACA CO-OP failure blame game

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.

Republicans on the subcommittee showed no interest in providing more cash or other relief to help the CO-OPs. “This is just money down the hole,” said Rep. Marsha Blackburn, R-Tenn. “This didn’t work.”

Morrison testified during the question-and-answer portion of the hearing that CO-OPs needed the PPACA risk corridors program, which was supposed to use cash from thriving exchange plan issuers to help struggling issuers, to work more than other carriers did because CO-OPs were new and had no pre-PPACA business to use to compensate for problems with PPACA-compliant business. The program has collected enough cash to pay less than 13 percent of the claims from struggling insurers.

In response to the CO-OPs’ concerns about the risk corridors funding shortfall, Blackburn said, “Any business in the country could be successful if it had a federal backstop. People have grown quite weary of these bailouts.”

Dr. Mandy Cohen, chief of staff for the Centers for Medicare & Medicaid Services (CMS), gave carefully rehearsed answers to the lawmakers’ questions. She did not answer a question from Rep. Larry Bucshon, R-Ind., about which CMS or U.S. Department of Health and Human Services (HHS) officials had signed the documents approving the CO-OP loans. Cohen said she would find the information and get back to Bucshon.

Bucshon laughed at the idea that Cohen or her aides would get back to him with more information.

Rep. Diane DeGette, D-Colo., the highest-ranking Democrat on the subcommittee, complained about Republican colleagues’ failure to work to improve PPACA programs, but she also questioned the information coming from CMS. DeGette asked why CMS had announced this past summer that it had enough cash to make good on risk corridors obligations, then announced, just three months later, that it had only enough cash to pay 13 percent of the program’s obligations.

Cohen said CMS did not realize that the program had a big funding shortfall until this fall, after health insurers had filed financial reports for 2014 coverage.

Each struggling CO-OP is facing different challenges, Cohen said.

James Donelon, the Louisiana insurance commissioner, who opposes PPACA, said the CMS oversight team in charge of monitoring CO-OPs had done a good job of working with his department to keep tabs on a CO-OP that eventually failed in his state. He noted that the managers of the CO-OP in his state seemed to be well-prepared to run a CO-OP, but that, ultimately, starting a CO-OP as the PPACA exchange system and underwriting rules came to life was like “learning to sail in a hurricane.”

Rep. John Yarmuth, D-Ky., suggested that the wide variety of reasons for CO-OP failures suggests that the program may be working roughly as expected, and that the failures may have to do with the kinds of problems that might confront any new, high-risk business, not with major problems with the CO-OP program rules or CO-OP program oversight.


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