Health co-ops were included in the Affordable Care Act with the goal of increasing competition and reducing prices of insurance, yet they are facing major financial issues around the country. A Washington Post story this week detailed the legislative history behind the inclusion of co-ops in the ACA, and why so many co-ops are plagued with financial issues.
Co-ops are nonprofit insurance companies created by public policymakers with the goal of increasing competition and bringing down costs of insurance. The Washington Post piece explains, “The co-ops have been set up by health-care organizations, such as hospitals and doctors groups, as well as by local businesspeople, unions and community groups, and are being run by a variety of people, including former hospital and insurance executives and two former state insurance commissioners.”
Senator Kent Conrad (D-ND) originally fought to include co-ops in the ACA. The proposal was in contrast to the idea of a government-run public option. Co-ops were thought to be a non-governmental resolution that would compete with private insurance companies; a compromise between the parties. A Congressional report commissioned by insurance and actuarial experts found that $10 billion in funding was needed to support the creation of co-ops and ensure their success.
Yet political forces during the ACA negotiation and further budget deals removed funding many experts think was necessary for the co-ops to function effectively. The White House also had doubts about the effectiveness of co-ops, and thus let roadblocks be incorporated into the ACA that made success more difficult. Prohibiting co-ops from the selling to large group plans and preventing federal money from being used for marketing are two such examples. John Hopkins Bloomberg School of Public Policy professor Karen Davis told the Washington Post, “One provision after another got stuck in there to limit their probability of success.”
The Washington Post writes, “If the co-ops were set up in a way that made many likely to fail, the way their financing was designed meant taxpayers could pay the toll.” Additionally, there are still concerns that in some states policy-holders may be left with the bill if a co-op goes under. There are two-dozen co-ops around the country that have begun selling insurance, and many are facing an uncertain financial future. Co-ops from Maryland to Colorado are having difficulty spreading the word about their insurance without violating the rule against marketing. While co-op officials say high debt and expenses are common for any start up, it remains to be seen how co-ops will function as the individual mandate goes in to effect in January 2014.