When Democrats were ramming Obamacare down Americans’ throats, many of them wanted a “public option” that was supposed to demonstrate just how efficient and affordable government-run healthinsurance could be. What they settled for was something called “co-ops”—which stands for Consumer Oriented and Operated Plans.
As the Washington Post explains, “The co-ops differ from traditional insurers in their nonprofit status, consumer focus and organizational structure; they will be governed by boards controlled by policyholders.” In other words, the co-ops would get rid of those greedy, self-interested actuaries and insurers who were profiteering on the backs of the sick. Not full-blown socialized medicine, but a good start.
Turns out the left will have to wait a little longer to prove the blessings of government-run health insurance. Standard & Poor’s Ratings Services just released its assessment of the 23 state co-ops, and all but one are underwater.
S&P writes: “All but one of the [23] co-ops included in our study reported negative net income through the first three quarters of 2014. … Most co-ops’ weak operating performance is a result of high medical claims trend and not enough scale to offset administrative costs. … In fact, nine of the co-ops (including CoOportunity Health) reported a MLR [i.e., medical loss ratio; the claims compared to premiums] of 100% or more through September 2014.”
In short, the co-ops are leaking money faster than an Obama green energy project, or Obama’s student loan program. Some are even spending more on claims than they’re receiving in premiums—the MLR—and that’s before any administrative costs.
The Wall Street Journal reported in January, “Iowa’s insurance regulator plans to shut down insurer CoOportunity Health, marking the first failure of one of the nonprofit cooperatives created under the Affordable Care Act. … CoOportunity had been seen as one of the most successful coops in terms of enrollment volume, but according to the Iowa regulator, the insurer’s large pool of sign-ups created financial pressures as their health-care costs outran its funds.”
It may have been the first, but it probably won’t be the last. As S&P concludes, “most [co-ops] seem to have adequate liquidity at least to survive in the near term.” Not what you’d call a glowing financial report.
The backstory is that leftists think health insurance and health care—and pretty much anything else, for that matter—would be available and affordable if only we took the profits out and let altruistic bureaucrats run the system.
And it’s more than just “controlled by policyholders.” People connected to the health insurance industry—that is, people who might actually know something about health insurance—are explicitly prohibited from being on a co-op board. Next thing you know leftists will try to prohibit anyone with any medical training from performing surgery. You see the problem.
But it turns out there is more to running a healthinsurance plan than altruism. People file claims, especially very sick people. It takes actuaries who know how to price the policies and administrators who can manage the care and claims—and try to minimize fraud.
As multiple news stories have reported over the past year, many of the co-ops were pricing their policies lower than the private health insurers they were competing against. That was an effort to get more sign-ups, which many did.
Take, for example this headline from Obamacare champion Kaiser Health News from December, “Obamacare Co-Ops Cut Prices, Turn Up Heat on Rival Insurers.” Or how about this Bloomberg headline from a year ago, “Obamacare Co-Ops Defy Forecasts to Win Market Share.”
A more accurate headline would be, “ObamacareConfirms Conservatives’ Forecasts That Taxpayers Will Have to Bailout the Failing Co-Ops.” See, it turns out that when you lower health insurance premiums, sick people rush to sign up, which raises costs. Who knew?
But here’s the really rich part. The Washington Post lists some of the complaints of the co-ops and their supporters: “So Congress saddled its new creations with onerous restrictions that, experts say, doomed many co-ops to failure. Federal grants for the co-ops were converted to loans with tight repayment schedules; they were barred from using federal money for crucial marketing; and they were severely limited from selling insurance to large employers, which represent the most lucrative market.”
Wait! You mean to say that the co-ops faced “onerous restrictions” that made it difficult to function? Well, health insurers have been making the exact same claim for decades, arguing that regulations and restrictions made policies more expensive. And yet the lefties, at both the state and federal levels, habitually pressed for even more of them. Now they complain restrictions keep them from doing a better job.
Oh, and the left is complaining that the feds were only willing to loan taxpayer money—$2.4 billion so far, according to S&P—to the co-ops rather than give it to them outright. Of course, the government wasn’t handing out taxpayer dollars to the health insurers—or at least it wasn’t before Obamacare. If the idea is to create competition for the private sector, it seems a little unfair to give the co-ops billions of taxpayer dollars and then gloat when private sector health insurers can’t compete.
And maybe the richest part is the comment about marketing. The left has been on a soapbox for two decades complaining that pharmaceutical manufacturers and health insurance companies advertise. If only those companies would quit spending so much money on marketing, the argument went, they could lower their prices and health care would be affordable. Now the co-ops are complaining that they can’t use taxpayer dollars to advertise!
So the co-ops lowered their prices and limited their marketing, just as the left has been demanding of the private insurers, and now they’re losing money.
Of course, the restrictions on co-ops haven’t stopped Obamacare from marketing. Billions of taxpayer dollars are going into advertising in newspapers, on television and in social media to try and get more people to sign up. The left has never explained why it’s outrageous for private sector health-related companies to use part of their revenues to advertise but perfectly all right for the government to use taxpayer dollars to advertise.
So the president who never ran a company, especially a health care company, and his left-wing enablers decided to prove that providing affordable health insurance was easy once you took the profits out and put in the bureaucrats. Thanks to him and Democrats, consumers are paying much more for health insurance and taxpayers are paying much more for all of Obama’s mistakes. Hubris has a price, but he won’t pay it—we will.