Two More ACA Cooperatives Go Down in Flames

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Just last week, the Advocates noted the Kentucky Health Cooperative announced that it would close at the end of the year. At the time, the cooperative, which was set up under the Affordable Care Act, was the six to shutter because of financial problems.

Since last week, however, two more cooperatives – Connect for Health Colorado and Oregon’s Health CO-OP – have been forced to close, bringing the grand total to eight. Roughly 400,000 people are now without coverage because of the failures. As the Washington Post explained on Friday, “Nearly a third of the innovative health insurance plans created under the Affordable Care Act will be out of business at the end of 2015.

Like other cooperatives, Connect for Health Colorado and Oregon’s Health CO-OP faced significant financial troubles. According to a July 2015 report from the Department of Health and Human Services Office of the Inspector General, Connect for Health Colorado lost $23 million in 2014 and Oregon’s Health CO-OP lost more than $6.7 million.

Cooperatives were supposed to be the big compromise for Democrats who wanted a single-payer program – the so-called “public option” – to compete with private health insurance companies.

“Markets have…been disrupted by a cascade of failures among the ACA co-ops that were intended as a liberal insurance utopia,” the Wall Street Journal noted. “These plans were seeded with billions of dollars in federal start-up loans and were supposed to work like the credit unions or the electric collectives of the Depression era.”

“No profits were allowed, advertising to introduce new products was restricted and industry executives were barred from management. As it turns out, attempting to outlaw expertise and incentives tends not to produce good results,” the paper added.

Indeed, just before the announcement, Oregon’s Health CO-OP CEO Phil Jackson tried to explain an average premium increase of nearly 20 percent. “Nobody knew what it was going to cost to provide insurance benefits on the exchange,”Jackson said. Yeah, it’s such a big surprise that costly health plans with mandated benefits that people may not want or need would attract too few healthy consumers and wind up requiring big premium hikes. Which is exactly what has happened in state after state.

With the next ACA open enrollment period set to begin on November 1, one of the key components of the law is faltering. It’s just a matter of time when the rest of it collapses. The only question is whether it’ll take the health insurance industry with it.