The ObamaCare Co-op Flop

More than two-thirds of the ObamaCare co-ops have failed, with even more likely to go under in the near future, leaving tens of thousands of Americans scrambling to find new health insurance and taxpayers holding the bag for billions in startup loans.

 

On Tuesday, the Illinois Department of Insurance announced that it is “seeking a court order allowing the state to take over Land of Lincoln Health and prepare the company for liquidation,” the Associated Press reported. Land of Lincoln Health is the state’s ObamaCare co-op.

 

Land of Lincoln thus became the 16th co-op to fail, and the third in just the past week. Twenty-three co-ops, or consumer owned and oriented plans, were initially created and seeded with $2.4 billion in federal loans for the purpose of providing a nonprofit alternative to private-sector insurance plans.

 

Many of the co-ops foundered because they simply weren’t able to make ends meet. Although they were already unlikely to succeed by virtue of the fact that they are government enterprises, ObamaCare’s mandates didn’t help. The co-ops are not allowed to have experts from other health insurers on their boards; to raise capital outside of government loans, which they cannot use to market their products; and to retain enough of their profits, if they have any, to fund future growth. As the Heritage Foundation’s Ed Haislmaier remarked, that the co-ops are failing so quickly “is less surprising then [sic] the fact that 23 of them actually got to market in the first place.” (There was supposed to be a 24th co-op, in Vermont, but it never got off the ground because the state’s insurance commissioner, not having imbibed the ObamaCare Kool-Aid, refused to issue a license for it owing to concerns over its future solvency.)

 

While the co-ops that are being shuttered now are hardly rolling in dough — Land of Lincoln, for instance, lost $90 million in 2015 and $17 million in the first five months of 2016 — the proximate cause of their hasty closures seems to be hefty bills from Washington, explained Investor’s Business Daily:

 

Because insurers operating in Obamacare exchanges are banned from pricing policies based on a person’s health status, the government had to create an elaborate “risk adjustment” program to protect insurers who get stuck with too many sick people, by taking money from insurers that signed up mostly healthy ones.

 

The problem is that many of the remaining — and already financially vulnerable — co-ops just found out that they owe millions to this program.

 

Read More: The ObamaCare Co-op Flop