South Carolina Obamacare Co-Op Flops

Leah Jessen / October 23, 2015

An Obamacare trend continues. With an announcement to not offer health insurance in 2016, Consumers’ Choice Health Insurance Company in South Carolina becomes the ninth consumer owned and operated plan (co-op) created under Obamacare to stop operations.

It was “an avoidable outcome,” according to a statement from Jerry Burgess, president and CEO of Consumers’ Choice.

Approximately 67,000 individuals and small businesses will have to find new health coverage.

So, why is Consumers’ Choice closing? A “frequently asked question” on the Consumers’ Choice Health Plan (CCHP) website answers:

“After coordinating with state and federal regulators regarding CCHP’s operations and its long-term sustainability, the decision was made to discontinue offering plans after 2015.”

On Oct. 1, the Department of Health and Human Services announced the 2014 risk corridor program proration rate. While designed under the Affordable Care Act to help the health care market, the temporary risk corridor program’s reimbursement rate resulted in a less-than-ideal equation for health co-ops crunching budget numbers.

“The recent announcement of a risk corridor reimbursement of just 12.6 percent cast doubt on the collectability of tens of millions of dollars through the federal risk corridor program and led to an unavoidable outcome,” Burgess states.

The risk corridor rate means that the Center for Medicare and Medicaid Services will reimburse co-ops 12.6 percent of the funds they have requested. In figure, co-ops will get $362 million of the $2.87 billion requested.

“Ultimately, the decision was made to wind down operations because the company’s financial condition could worsen significantly,” the South Carolina co-op notes.

After the dissolution of multiple co-ops in a short time span, CEO of National Alliance of State Health CO-OPs said in a statement on Oct. 16:

“This week’s news should not be viewed as start-up failures, but rather closures due to unfulfilled promises.”

Consumers’ Choice opted to make its decision now so members can switch health coverage in 2016 rather than in the middle of a benefit year.

Ray Farmer, director of the South Carolina Department of Insurance, said in a statement, “This is what is in the best interests of South Carolina consumers and health care providers.”

Consumers’ Choice has received over $87.5 million in federal loans.This co-op is one of the 22, out of the 23 co-ops created under Obamacare, to lose money in 2014.