Ten of the 23 health insurance co-ops created under Obamacare have gone out of business, and experts say more will follow.
Utah’s Arches is the latest co-op to fail, along with others in Kentucky, New York, Nevada, Louisiana, Oregon, Colorado, Tennessee, South Carolina and a co-op that served both Iowa and Nebraska.
Experts say that the co-ops are failing because of artificially low premiums, strict regulations, and too many people requiring payouts.
“In most cases, they priced too low relative to what their claims costs were going to be, that’s what the operating margins were all about,”said Thomas Miller, a fellow specializing in health care policy at the American Enterprise Institute.
“Now what made them attractive was they’re offering lower premiums so more people want to sign up for that, but that’s a dangerous proposition where you’re making up your losses on volume,” Miller explains. “You’re getting more people, but those extra enrollees you’re bringing in are being underwritten at a loss.”
“The co-ops are losing more than they’re bringing in because they’re paying out for older, sicker populations and don’t have enough younger, healthier people to help share the cost burden,” says Nathan Nascimento, a senior policy adviser at Freedom Partners. “This is in part because the monthly premiums set up by the co-ops were set artificially low compared to other plans.”
“Co-op insurers are heavily subsidized and operate under strict regulations,” he explains. “They’re more heavily regulated than other insurance plans offered in the health care exchange.”