Well, I didn’t think this explanation of health care coops would go on this long.  But, it turns out there’s a lot to setting up new insurance companies. (Yes, I should recall how much it took to set up our liability insurance coop, as I described here.)

So far, we’ve discussed how the initial capital for these health care coops went from being grants to loans- and instead of providing $ 10 billion, the maximum level of funding was cut to $ 2.4 billion.  And, then, instead of having the federal government equalize the initial risk distribution (to cover the fact that some insurers would be saddled with the old and the sick and others with the young and healthy- to “balance” the costs among them) until some history and projections could be developed, the rules changed and risk distribution became a transfer from the coops to the established firms.  (This happened because the coops offered cheaper rates [as expected]- and the millennials recognized the bargain they were being offered.)

 

There’s also a general fund that would reimburse insurers for the costs involved with taking on the newly insured.  Because most of these folks were probably holding off on getting the treatment they needed, since they lacked insurance.  These are termed “risk corridor” funds.  It was expected that these would total some $ 2.87 billion in 2014 that the government would reimburse.  But, surprise, only 12.6% of those required funds were allocated- for a sum total of $ 362 million.

So, given the fact that the coops were started with loans and not grants, they got hit with risk distribution for which they had no allocations, and now their risk corridor funds have disappeared… it’s not surprising that ½ of the coops are on very shaky ground.

And, the lack of advertising support didn’t help.  For example, the Nevada health coop is really an outgrowth of the large culinary union there.   The hotel and restaurant workers in Las Vegas were expected to join the coop their union started.  But, most of the members hadn’t even heard about their coop.  So, only 17000 of the members signed up- out of more than 34,000 members.

And, Kentucky’s coop (51,000 members) was shortchanged $ 67 million of the risk corridor funds they expected.  The Iowa plan (it also covered part of Nebraska) has been taken over by state regulators due to cash shortages.  Louisiana, South Carolina, New York, Colorado, and Tennessee are about to fold.

That’s true even though the coops had more signups than they did in 2014 (all but one coop grew subscribers). And, some of the net losses might have been smaller than they were six months ago, but they are still not profitable.  9 of the coops lost capital. All this means that the federal loan program is pretty much assured of being on the hook for the $1,072,174,773 loans to these 11 coops.

It’s those write-downs- from the lack of risk aversion funds and the transfers from the risk distribution that were not to be part of the initial obligations, coupled with the fact that the startup ‘capital’ was a loan and not a grant- that are making state regulators so nervous.  And, we are now in the throes of annual signups…and the 500,000 insured (or thought they were) with the state coops are among those that need to scramble for new insurance.

These COOPs have generally been the lowest cost programs among the choices available to US citizens.  Except for the Medicaid option.  But the Republican-led states have generally refused to opt-in to Medicaid expansion.

Oops.  That means a great deal of the 8 million uninsured will stay that way.  And, why most of the uninsured are found in the South and Southwest.  And, are among the  poorest.  That’s why the map above is so dark among the Southern and Southwestern states.

But, Indiana and Pennsylvania and Ohio have opted in to the program, despite their Republican affiliation.  And, in that first year since they opted in, their health care coverage became pretty wide-spread.  Simply proving the point that we are discriminating against the poor in those opt out states.

With few COOPs and no Medicaid expansion, it seems pretty likely that we still will have substantial numbers of citizens lacking insurance in 2016 and beyond.