Senate Committee Chairmen Question Obama Administration on Struggles of Obamacare Co-Ops

The chairmen of two Senate committees are questioning the Obama administration on the struggles of nonprofit insurance companies created under Obamacare that have received $2.5 billion in taxpayer-backed loans.

In a letter to acting Administrator for the Centers for Medicare and Medicaid Services Andy Slavitt, Republican Sens. Orrin Hatch of Utah and Lamar Alexander of Tennessee question the steps the federal government is taking to ensure, first, that taxpayer-funded loans awarded to the consumer-operated and oriented plans, or co-ops, will be repaid, and second, that consumers will have up-to-date information on the plans available to them.

“The co-ops are not living up to these expectations,” the senators wrote. “To date, eleven [Affordable Care Act] co-ops—in Arizona, Colorado, Iowa, Kentucky, Louisiana, New York, Nevada, Tennessee, Oregon, South Carolina and Utah—have collapsed. As a result, hundreds of thousands of Americans will lose their health insurance plans and will have to scramble to find new plans, most likely with higher premiums and deductibles.”

Hatch serves as the chairman of the Senate Finance Committee, and Alexander is the chairman of the Senate Health, Education, Labor and Pensions Committee.

In 2012, 23 co-ops were created to inject competition in areas where few health insurance options were available. However, in some states where the co-ops were created and later failed, consumers are left with few to no options.

For example, Hatch and Alexander pointed to Utah, where co-op Arches Mutual Insurance Company announced that it would be closing its doors last week. As a result of the closure, nearly 50,000 Utah residents are forced to purchase new health insurance, and, according to the senators’ letter, consumers in 20 of 29 counties in the state have just one option on the exchange.

“With the failure of 10 co-ops and potentially more to come, we note that it is imperative that consumers be given as timely of information as possible about what plan options are available to them,” Hatch and Alexander wrote. “This is difficult when as of the date of this letter all 10 of the co-ops that have indicated they are ceasing operations are still listed as viable plan options for the 2016 enrollment period.”

The 23 co-ops created under Obamacare received more than $2.4 billion in start-up and solvency loans from the federal government, and more than 850,000 Americans purchased plans from the nonprofit insurance companies.

Collectively, the 11 co-ops that announced impending closures received more than $1.1 billion in loans from the Centers for Medicare and Medicaid Services and enrolled 690,000 consumers in plans.

The Obama administration has not yet said how it plans to ensure that the collapsed co-ops repay the loans they received, and Hatch and Alexander asked Slavitt to outline what steps the Centers for Medicare and Medicaid Services will take to protect taxpayer dollars.

“Over $2.4 billion in federal start-up and solvency loans has been paid to co-ops,” the senators wrote. “The massive failures of so many co-ops raise concerns about an ACA program that was designed to increase competition.”

A July report from the Department of Health and Human Services Office of the Inspector General found that 21 of the 23 co-ops lost money in 2014, which raised questions regarding the viability of the remaining 12 nonprofit insurers that are still standing.

Additionally, the inspector general reported that 13 of the 23 co-ops failed to meet enrollment projections for last year.