As a sop to those who wanted a single payer plan, the reform law provided federal funding to establish non-profit “Consumer Operated and Oriented Plans”. A number of organizations took advantage of these federal loans to start COOPs. Many had inexperienced management and poor oversight and have already shown absurd pricing behavior. This has resulted in concerns about the financial stability of these plans (at least one, in Nebraska/Iowa, has already gone bankrupt) and the security of the health coverage they are supposedly providing to consumers. The Office of Inspector General at Health & Human Services examined the COOPs and issued a report. (OIG Report) As of December 31, 2014, there were 23 COOPs. A total of $2.3 billion has been loaned to these organizations, supposedly only to ones that demonstrated a high probability of being financially viable, but it looks like HHS just gave money to anyone who wanted it. OIG found that most of the 23 plans had not met their own projections for enrollment or profitability. 21 of 23 had net losses as of year-end 2014, notwithstanding the fact that they also participate in the federal reinsurance, risk corridor and risk adjustment programs. CMS has placed 4 of the COOPs on enhanced oversight, whatever that means. OIG’s review suggested that many of these COOPs had inadequate business plans, particularly in regard to sales and marketing and have floundered around trying to adjust those to get more enrollment. And some of the plans that did exceed initial member projections, did so because they offered lower rates than other insurers but then lost money doing so, so for 2015 and especially for 2016, some are asking for dramatic rate increases. More than half the COOPs lost more than $15 million in 2014, and 19 of 23 had claims expense alone that exceeded premium revenue, without taking into account administrative costs. Losses can be expected in startup plans for a year or two, but generally that is due to lack of scale to cover administrative expenses, not to such woeful mispricing. It is pretty clear that OIG thinks HHS has mismanaged the loan program from the start and there is a good chance that taxpayers just won’t see their money repaid.
✅ Subscribe via Email
About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
Healthy Skeptic Podcast
This is an outstanding report on total global drug spending and trends, with projections out to 2025. It helps you understand this important area of health care, which does much...
June 1, 2021
MedPAC 2019 Report to Congress
June 18, 2019
It may be investors that need the redesign. They just keep pouring money into this digital health crap despite all the losses. Redesign Health claims that it makes money by...
September 16, 2022
In truth, this seems like more money down a rathole. Google’s parent and other investors are putting a billion dollars into Google’s health arm, Verily. Apparently want to compete with...
September 12, 2022
It is like investors have learned nothing from the past two years. Even supposedly smart investors like Morgan Health, which is making a $20 million contribution to LetsGetChecked, which supposedly...
September 12, 2022
Access ACO Care Management Chronic Disease Comparative Effectiveness Consumer Directed Health Consumers Devices Disease Management Drugs EHRs Elder Care End-of-Life Care FDA Financings Genomics Government Health Care Costs Health Care Quality Health Care Reform Health Insurance Health Insurance Exchange HIT HomeCare Hospital Hospital Readmissions Legislation M&A Malpractice Meaningful Use Medicaid Medical Care Medicare Medicare Advantage Mobile Pay For Performance Pharmaceutical Physicians Providers Regulation Repealing Reform Telehealth Telemedicine Wellness and Prevention Workplace