Obamacare

Obamacare's Government-Backed Nonprofit Health Plans Are a Disaster—and Could Cost Taxpayers Billions

Inspector General's report warns that billions in federal loans might not be repaid.

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Whitehouse.gov

The federal government shelled out $2.4 billion in loans to a series of non-profit health plans under Obamacare, but now they're struggling to stay alive.

The plans, dubbed CO-OPs (Consumer Operated and Oriented Plans) were intended to increase competition in the insurance market and serve as a check on private insurers by providing an alternative that wasn't focused on profit. They were a compromise measure intended to satisfy liberals who wanted the law to set up a fully government-run health insurance option. 

As it turns out, Obamacare's CO-OPs weren't focused on profit—or, it seems, financial viability of any kind.

The CO-OPs have struggled to meet enrollment targets, with 13 of the 23 non-profit plans showing "considerably lower" enrollment than projected, according to a report by the Health and Human Services Inspector General. Finances were shaky all around with 21 of 23 plans incurring losses through the end of 2014, the report says.

This isn't just a problem for the CO-OPs. It's a problem for the taxpayers. The $2.4 billion in loans given to these startup plans were supposed to be repaid to the government with interest. Loans given to start the plans were supposed to be repaid in five years; "solvency" loans were supposed to be repaid in 15 years.

But given the dismal finances of these plans, it's not clear that much of the money will ever be repaid. As the IG report dryly notes, "The low enrollments and net losses might limit the ability of some CO-OPs to repay startup and solvency loans and to remain viable and sustainable."

Federal health care bureaucrats don't seem too bothered by this. While CMS has put four of the plans on a shorter leash through enhanced oversight, the IG reports, the health agency hasn't even set out clear rules about what constitutes viability or sustainability.

In the interests of public service, let me suggest one measure that might make it clear that one of these government-backed plans is unsustainable: It plans to shut down. That's what's happening to the Louisiana Health Cooperative, one of the health insurers started under the CO-OP plan, which says it will shutter before the year is out.

The reason for the closure is simple enough, according to the organization's CEO: not enough members, and therefore not enough money, to keep going. Records indicate that the company reported a $5.7 million loss last year, reports Modern Healthcare; for every dollar in premiums it collected, it paid out $1.13.

Shutting down is not going to help consumers. It's going to inconvenience them. And if other plans follow in shutting down, the CO-OP experiment will end up costing taxpayers more than a little bit of money.

Program failures like this serve as handy reminders that profits can actually provide helpful signals about the success and viability of an organization and its services. (For-profit insurers operating in Obamacare's marketplaces are handicapped to some extent by regulations governing the design of their products and capping profit margins, but they at least have some sort of market signals.)

And they demonstrate how poor the judgment of federal health bureaucrats is when it comes to picking successful entrants into a marketplace—even a marketplace, as with Obamacare's exchanges, that they helped design. At least in theory, the Centers for Medicare and Medicaid Services (CMS), which oversaw the program, only picked organizations that, as the IG report says, "demonstrated a high probability of becoming financially viable." It seems clear at this point that the majority of them are not, and that both taxpayers and consumers will lose as a result. 

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  1. I thought government knew how to do business.

    1. What the pluperfect hell ever gave you THAT idea?

  2. Only in the XXX video sense of the verb.
    Just as government fixes problems in the veterinary sense of the term.

    1. They put on a glove that goes up to their shoulder and jam a whole arm up your ads? Or were you thinking of a different veterinarian?

      1. Ass! Goddamn phone.

        1. It’s the FCC that shoves its arm up your ads, so you were OK.

  3. “New Survey Finds 68 Percent of Previously Uninsured Adult Californians Gained Coverage Since the ACA’s Implementation”
    […]
    “The survey finds most of California’s previously uninsured enrolled in Medi-Cal (34% of all uninsured adults in 2013), with employer coverage (14%) and Covered California (12%) covering most of the others.”
    Yeah, it’s easy to ‘insure’ people when they don’t have to pay.

    1. Even if you took the claim at face value:

      – that doesn’t mean those people are actually going to use their sparkling new health insurance, partly because:
      – there aren’t any more resources (personnel, equipment, facilities) to treat them than there were before.

      All of this of course was pointed out long ago by people who understood that coverage ? care. With all of the promised “controlling the costs”, you can safely bet that this situation isn’t going to change much. Why would anyone with better options available go into medicine when the employment situation is becoming ever more dismal?

      1. Exactly. Medicaid reimbursements havn’t increased, so what makes anyone think there are going to be more doctors willing to treat medicaid patients? It just means longer lines at the shitty walk-in clinic.

        1. gov’t should make doctors do the work by force.

    2. And with the average silver plan deductible being over 6 grand for a family, having insurance now is just about as useless as not having it before. Except many have to pay some sort of premium to boot, so it’s worse.

      1. A silver plan in CA for my family of four all in good health is quoted at $17k right now. That is just the premium.

        Oh and short term non ACA plans are $3k for 12 months and the penalty is easy to find a way around.

        Put a fork in it, these pricing structural differences are unsustainable in the long run.

    3. It’s noteworthy that the biggest chunk of the increase is basically because poor people are being forced to enroll in Medicaid now.
      A lot of them were probably eligible before but just not signed up. Now, you have to sign up or pay the tax penalty.
      It’s not like these people are really going to get better health care though, because if they didn’t bother to sign up before they probably aren’t going to use it now. And it’s not like Medicaid reimbursements have gone up either. So even if they do you’ll just have more people crowded into the same shitty clinics that serve the medicaid population.

    4. Should be:

      Study finds that 34% of previously uninsured adult Californians went on welfare, and 26% got insurance.

      1. This was my take on the issue. O-care be damned; we just opened the flood gates for subsidized ‘insurance’.
        Whether that converts to better health is an entirely different question.

        1. What part of intentions don’t you understand?

  4. It would be interesting to see how this money was spent – lavish offices, employee perks, cronyism?

    1. Licensing fees, regulatory compliance…….

    2. Page 16 of the report showing the “General Admin Expenses”… ouch.

    3. What? No, that stuff is all in the budget. This excess is just strict incompetence.

    4. Obamacare tax on equipment. Ironic Obama gives a little and takes more back

    5. At certain nonprofits I’ve worked for, it went into expensive office furniture.

    6. “Records indicate that the company reported a $5.7 million loss last year, reports Modern Healthcare; for every dollar in premiums it collected, it paid out $1.13.”
      With that ratio it wouldn’t matter if the executives got minimum wage, worked on low tables with moldy cushions and you made them repair their own tables with superglue, they still couldn’t survive.

  5. ?and Could Will Most Assuredly Cost Taxpayers Billions

    Better

    1. I actually view that as “worse”, but YMMV

  6. Is there any part of Obamacare that is not an abject failure? I should change that question.

    Is there anything this fucking clown has done that is not an abject failure?

    1. Wow, racist much? Why don’t you go worship your Confederate Battle Flag? you sub-Mason-Dixon neanderthuglihadist???!! It’s like you LITERALLY raped Michelle Obama by hatin’ on her husband like you just did. Unforgivable….

      1. Raped Michelle Obama?!

        Gahck! *spit spit spit*

        1. See, and the fact that you expressed that you would be disgusted at the thought of taking what you want from Michelle instead of tittilated by it is rayciss.

          1. I thought maybe she was deep throating him.

            1. Please pass the mind bleach

    2. It’s too early to tell, but rapproachement with Cuba and detente with Iran might work out.

      I tend to think Obama’s rapproachement is better than hostility. If this is correct, that alone makes him better than McCain, since McCain is just as spectacularly bad as Obama in just about every other aspect.

      It’s going to take about twenty years, however, to figure out whether rapproachement with these totalitarian states can work.

      1. It’s too early to tell, but rapproachement with Cuba and detente with Iran might work out.

        That kind of depends on what your metric for success is.

        1. I suspect the Cuba one will be a wash. There will probably be some uptick in trade but not much else – good or bad.

          1. Indeed. Cuba has only been embargoed by the US (to my knowledge); it’s not like Europe, Asia, or the rest of Latin America have embargoed them as well. If things haven’t changed much there in the last 50 years, they aren’t likely to change much after the US embargo ends. Which is not to say that it shouldn’t be ended; although, as usual, Obama goes about this in the most politically toxic way possible.

            1. Obama goes about this in the most politically toxic way possible

              He seems to have a knack for that, the great uniter. Given how much Cuban-Americans detest Castro, why not at least a courtesy meeting with them. But, no, that’s not the way it’s done. One of the images that will best represent the last 8 years is Pelosi walking through the ACA protestors with that over-sized gavel: we’re not only going to pass the bill, we’re going to stick it right to you. And then accuse our opponents of dividing the country.

              1. They don’t vote for him, so fuck them.

  7. “The plans, dubbed CO-OPs (Consumer Operated and Oriented Plans) were intended to increase competition in the insurance market and serve as a check on private insurers by providing an alternative that wasn’t focused on profit.”

    Someone should write a book entitled “Capitalism for Dummies Progressives”, in which each page consists of single sentence explanations such as the following:

    “Because profit is the difference between sale prices and costs, the profit incentive drives companies to minimize their costs”.

    And then you’d have like a coloring book image where people can use crayons to color it in and see the relationship between costs and profit.

    It seems so basic, and it is! It’s just that a progressive’s understanding of how the economy works is dumber than creationism–I guess progressives think it’s smart because our President is just as dumb as they are?

    1. May Kommissar Owebozo forgive you!

    2. “”Because profit is the difference between sale prices and costs, the profit incentive drives companies to minimize their costs””

      “Which is why the sleazy corporate overlords pay so little to the working poor, just so they can squeeze every drop of blood bought profit into their own evil capitalist pockets!!”

      /prog

      1. Money is an illusion! If we just THINK correctly, we will find that we have all the resources we need! Our brains have just been trained through years of living in the capitalist system to believe in things like getting paid and that there’s a limited amount of money. Just imagine a different world! One where everyone has everything they need!

        1. HazelMeade|7.31.15 @ 11:53AM|#
          “Money is an illusion! If we just THINK correctly, we will find that we have all the resources we need!”

          You joke, but a during the Greek ‘crisis’ several weeks back, people on various boards were seriously proposing that “Greece abandon the Euro and just print as many Drachmas as the wished, since money really doesn’t mean anything anyhow!”
          Fortunately, there were usually folks around to mention that an effort like that would mean wheel-barrows full of currency to buy gas for the car.

          1. money really doesn’t mean anything anyhow

            There is an inverse correlation between how much somebody professes that they don’t care about money and how much their actions demonstrate otherwise. For some of them, there isn’t even a pause between “money isn’t the most important thing in life” and “the rich should be taxed heavily”.

          2. The fallacy is that they think that increasing the number of dollars in circulation will magically cause more goods to exist, in proportion to the increase in the money supply. That there’s an infinite supply of goods that people just don’t have dollars to pay for. I.e. they think that there are doctors just sitting around idle who would be busy treating patients if only the patients could afford to pay them.

            Of course it IS true that increased demand will cause people to produce more goods, for instance increased demand might cause more people to become doctors. But there are also basic resource limitations on the amount of goods that can be produced. The supply of doctors is limited by all sorts of factors like the number of residency slots and medical licensing, as well as the reality that not everyone is capable of doing the work. Nevermind the costs involved in producing medical equipment, like CAT scans and MRIs.

            Over a long period of time, the supply could catch up to demand, but that response is not instantaneous, and the market is constantly changing. So no, printing more dollars doesn’t magically cause food and drink to appear on the shelves. And the increased demand will cause prices to rise, which devalues the dollars of everyone who previously had them.

          3. Hungary tried that in the 1940s.

            Bread cost over 1,000,000,000,000 peng?, or about 12 cents (US).

            They ended up replacing the peng? with the florint at the rate of 4×10^29 to 1.

    3. Progressives think that because they feel something is morally right, that means it must be physically possible. I.e. Because everyone morally ought to have the right to health care, it must therefore by economically feasible to give it to everyone.

      They really don’t think much beyond the “health care is a right” and actually start examining things like resource scarcity. They just stop there and bang their head against the brick wall of reality and are perpetually befuddled when reality doesn’t come up with the healthcare.

      But of course, instead of blaming reality, they will blame “capitalism”. Because, see, it’s the evil capitalist system that refuses to provide them with the free resources they ought to have. Those Co-ops wouldn’t have gone out of business if it weren’t for the evil rapacious capitalist environment with it’s greedy insistence on balancing budgets and paying back loans. See? More prrof that we need global communism – as long as people live within the evil capitalist system they can’t get the free resources they need to build the worker’s paradise.

      1. “Progressives think that because they feel something is morally right, that means it must be physically possible.”

        I’m surprised they don’t outlaw gravity.

        Do you know how many minorities gravity kills every year?

        1. I think they don’t outlaw gravity because then they wouldn’t be able to TAX gravity.

      2. lets not forget how many progressive regulations put physical limits on medical care availability, minimize some of it such as where doctors can be taught and you increase the doctor pool and decrease the cost.

      3. They really don’t think much beyond the “health care is a right”

        It could only be a right IF gov’t stuck a gun in a doctor’s belly and made them deliver it (doctors should have no rights).
        Of course everyone DOES have the right to put a band-aid on their own booboo.

    4. “Because profit is the difference between sale prices and costs, the profit incentive drives companies to minimize their costs”.

      But you SHOULDN’T be trying to minimize your costs Ken. That’s IMMORAL. It’s mean and nasty and selfish and greedy to try not to spend money on LIFE-SAVING MEDICAL CARE.

      1. I thought the purpose of ObamaCare was to reduce costs and make quality health insurance more affordable.

        My bad!

      2. But you SHOULDN’T be trying to minimize your costs Ken. That’s IMMORAL. It’s mean and nasty and selfish and greedy to try not to spend money on LIFE-SAVING MEDICAL CARE.

        The cognitive dissonance is truly amazing. The ACA was sold in part on the premise of “controlling rising healthcare costs”; that is, in fact, what the “affordable” in the name was referring to! How do they expect to do that if not by, you know, cutting costs? Of course, the primary driver of increasing costs* has been regulatory compliance and administrative overhead, both of which have ballooned thanks to the ACA.

        * This needs an important footnote. A primary driver of increases in aggregate spending has been the availability of new procedures, medications, and instruments as well as improved standards of care, both of which are developments that should rightly be applauded. However, those “costs” are (were) being paid by people voluntarily; they wanted better care and they ponied up the money for it. This is why pointing to aggregate spending as an objective indicator of cost (“the US spends more than any other first-world country!”) was dangerously stupid. How much does a comparable procedure cost in the US versus other first-world countries? Better yet, how easy is (was) it to get that procedure in the US versus elsewhere?

        1. Don’t you remember? Costs were going to be cut by something something waste and fraud! Easy peasy.

          1. The objective was to cut SOMEBODY’s cost. Not yours, however.

        2. “The ACA was sold in part on the premise of “controlling rising healthcare costs”; that is, in fact, what the “affordable” in the name was referring to!”
          Wait, that was referring to something? I thought they were just trolling us!

    5. It seems so basic, and it is! It’s just that a progressive’s understanding of how the economy works is dumber than creationism–I guess progressives think it’s smart because our President is just as dumb as they are?

      Is it economic creationism?

    6. Someone should write a book entitled “Capitalism for Dummies Progressives”, in which each page consists of single sentence explanations such as the following:

      “Because profit is the difference between sale prices and costs, the profit incentive drives companies to minimize their costs”.

      I have an addition couple sentence:

      “Because profit is the difference between sale prices and costs, the non-profit incentive drives companies find ways to spend extra cash extravagantly. For example, expensive office furniture and sofas for executives, TVs for executive offices, yearly upgrades to executive laptops and other electronic devices, and other perks.”

      1. No kidding. “Non-profit” doesn’t actually mean “no profit.” Rephrasing the executives’ increased wealth as “costs” instead of “profit” is style over substance.

    7. Reminds me of the old Father Guido Sarducci SNL bit about his 2 minute course of all the things you’ll remember after you graduate.

      It went something like:
      “Science: H2O”

      OK now I had to look it up… It’s actually his 5 minute University for $20

      https://www.youtube.com/watch?v=kO8x8eoU3L4

      “Spanish: Como esta usted. Muy bien”

  8. Obamacare is a scam, of course.

    But then again, so is social security, medicare, medicaid, the FDA, welfare, etc. etc. ad infinitum.

    That’s because, tah dah! government is itself a gigantic scam/fraud – always has been, always will be.

    However :

    “In your dream, Obama is not a scam”
    “In your dream, George Bush was not a scam”
    “In your dream, Clinton was not a scam”
    “In your dream, Reagan was not a scam”
    “In your dream, all the rest were not a scam”
    “In your dream, the constitution was not a scam”…….”

    Quotes from original music and lyrics: “Dreams[ Anarchist Blues]”: http://www.youtube.com/watch?v=w0o-C1_LZzk

    Regards, onebornfree.

    Personal Freedom Consultant:
    http://www.freedominunfreeworld.blogspot.com

    1. cool story, bro

  9. “The low enrollments and net losses might limit the ability of some CO-OPs to repay startup and solvency loans and to remain viable and sustainable.”

    There is no sugarcoating it.

    1. Unhelpful, even.

  10. I suspect this may also be the canary in the coal mine in terms of the health insurance death spiral.

    My guess is that the co-op plans may have been priced significantly higher because they did not use the cost-limiting tactic of narrower networks that the profit-making health insurance industry did. As a result healthier people were probably siphoned off into the narrow network bronze plans that the insurers were offering, leaving the co-ops with a sicker portion of the population.

    Of course, this is all forseeable from their stated “non-profit” goal. They aren’t trying to compete to get costs down, so they aren’t able to lower their premiums, so they attract fewer customers. Duh. (It’s the same story with every other moronic lefty idea for a non-profit anything).

    Now, what happens when the co-ops die off? Now all the sicker people in the co-op plans will sign up for silver and gold plans with wider networks in the for-profit insurers, dirving up the costs of those plans, and driving more people into the cheaper, narrow-network bronze plans.

    You can see where this is headed…

    1. You can see where this is headed…

      Single payer, where the insurance company can print its own dollars.

  11. Great, now shriek will be in here later defending TEH GREAT FREE MARKET HEALTH REFORMZ.

    1. If you were to take shriek at face value, he is the quintessential “big picture” guy. He doesn’t care about the details, the inner workings, or the realities of politics and government. If other “big picture” thinkers said that the law would do X, then by golly that’s what it’s going to do! Smart people have figured all this out, don’t you know? The idea that markets are organic and built from the bottom up is beyond his ability to comprehend. To him, society is broadly defined by his fellow ubermenschen and “capitalism” reflects just a different style of management. That actual people living actual lives are going to have to suffer for some Top Men’s vision is irrelevant; capitalism is better than socialism, the Top Men have given us “capitalism”, and so we will prosper! Facts be damned.

      The same is true of Tony (again taken at face value), except that his preference is for socialism. He doesn’t concern himself with the little people; he knows that socialism is better for them, and so when Top Men give us socialism, we will all be better off! That, again, the rest of us aren’t worker bees laboring gladly for the queen is meaningless.

  12. “by providing an alternative that wasn’t focused on profit. ”

    There is always profit or no one would show up. If it’s not profit for shareholders, it’s profit for management.

  13. How does a non-profit pay back a government loan, by charging enough to make a profit so that they can make the payments, something a non profit can’t do and of course charging enough to make a profit would make them like any other insurer, something consumers apparently can’t/won’t pay. Requiring something to do something thats impossible is typical of our government.

    1. The cost of repaying the loan would be an expense for a non-profit so it would reduce any profit shown.

      Non-profits are allowed to make a little profit. The money goes into reserves or is reinvested in the company.

      1. How many for profit insurers have to pay off start up operating loans that the non-profit has to pay. It seems like a burden put on the non profit the the for profit doesn’t have to deal with, hence they then have to charge a premium that the for profits don’t.

        1. But the for-profits are taking those inefficient profits, so that should counter-balance the non-profits taking the loan repayments out, shouldn’t it?

          1. Don’t forget the taxes on the profits!

        2. If a for-profit got the same deal, they’d have the same costs. 😀

          It’s not unusual for a company to take out loans to open up.

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  15. ” Nonprofit Health Plans Are a Disaster?and Could Cost Taxpayers Billions”

    Well, they SAID they were going to be ‘non-profit’. and they’re just really really good at the Non part.

  16. A daily dose of HuffingtonPost will drive these illusions of reality away

  17. SITUATION: Peter Suderman says that Obamacare CO-OPS are losing money and are unsustainable.

    YOU SAY: Poor deluded Uncle Peter got his hands on some old talking points. CO-OPs make our economy strong!

  18. I work with non-profits who get govt funds. They operate from their own set of accounting standards. In other words, they pay themselves first, VERY well, then they worry about using the money for the purpose(s) intended. This is called TAKE THE MONEY AND RUN!

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