Health Reform WK-EDGE ‘Bad decisions’ caused CO-OP failures
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Monday, March 21, 2016

‘Bad decisions’ caused CO-OP failures

By Kathryn S. Beard, J.D.

In his opening statement, Sen. Rob Portman (R-Ohio), chair of the Senate Permanent Subcommittee on Investigations, placed the blame for the poor performance of the Consumer Operated and Oriented Plan (CO-OP) Program squarely on HHS’ “bad decisions.” The statement, which kicked off the Subcommittee’s hearing titled “Review of the Affordable Care Act Health Insurance CO-OP Program,” said that HHS ignored serious problems, delayed corrective action, and continued to approve loans to failing—now failed—CO-OPs. Much of the hearing was based on the content of a Majority Staff Report finding that HHS failed to exercise good stewardship of public money in funding the program.

Section 1322 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) requires the HHS Secretary to establish the CO-OP program, a network of non-profit health insurance providers to compete with private insurers in the individual and small-group markets. The ACA also authorizes HHS to issue low-interest loans to CO-OPs to assist with the establishment and maintenance of plans. A July 2015 report from the HHS Office of Inspector General (OIG) indicated that most CO-OPs did not meet program enrollment and profitability projections as of December 31, 2014 (see Most ACA CO-OPs not meeting goals, August 5, 2015). Before open enrollment for 2016 began, 12 of the original 23 CO-OPs closed or were ordered to shut down:

The Permanent Subcommittee on Investigations hearing listened to testimony from CMS Acting Administrator Andy Slavitt and Marketplace CEO and Deputy Administrator Kevin Counihan. The CMS officials touted the important role played by CO-OPs in providing affordable health insurance options. They explained that before providing additional funding to CO-OPs, the agency undertook a rigorous review process, and further reminded the Subcommittee that Congress made “substantial rescissions” from the program’s initial funding.

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