Obamacare Health Insurance Co-Ops Falling Apart

Under Obamacare, co-ops reportedly are on life support.

This apparently means that failing state co-ops are included on the list of problems with the implementation of Obamacare, a.k.a. the Affordable Care Act.

Co-ops were presumed to be an alternative means for consumers to buy coverage on the health exchanges other than through the big insurances companies. These non-profits, set up by hospitals, medical practices, business or union groups, and others have received in the range of $1 to $2 billion in low-interest government loans to get started. Co-ops were included in the Obamacare law as an alternative to a public option. To make matters worse perhaps, co-ops also rely on the proper operation of the online exchanges (at the federal and state levels) for business.

According to the Washington Post, however, the taxpayer-funded co-ops are “already in danger” because of insufficient funding and excessive regulations:

“While the debut of the Affordable Care Act this month has been marred by widespread computer problems, the difficulties the co-ops face have been less obvious to consumers. One co-op, however, has closed, another is struggling, and at least nine more have been projected to have financial problems, according to internal government reviews and a federal audit. Their failure would leave taxpayers potentially on the hook for nearly $1 billion in defaulted loans and rob the marketplace of the kind of competition they were supposed to create. And if they become insolvent, policyholders in at least half the states where the co-ops operate could be stuck with medical bills.”

National Review Online further outlines the issues with the healthcare co-ops, including that 40 applicants already dropped out because of funding cuts :

“Concerned that funding for the co-ops would be tantamount to a government handout, Congress decided to offer the entities loans, but the size of loans were soon cut and regulations were added prohibiting government funding from being used for advertising and preventing co-ops from offering insurance to large employers. Eventually all other government funding was eliminated, leaving the co-ops to survive on their own with limited government support, a task they’ve struggled at.”

Separately, the Washington Post has also reported that the Obamacare problems go deeper than just the glitch-filled healthcare.gov website. “… the challenges right now can be grouped into three broad categories: problems with the consumer experience on the HealthCare.gov Web site, problems with the eligibility system, and problems with the hand-off to insurers… No one quite knows the extent of the problems in each of these areas. No one knows how long it will be until all these systems are working tolerably well. No one has any idea how long it’ll be until they’re working smoothly.”

Are you aware if there is or was an Obamacare co-op in your state?