To hear President Obama talk about Obamacare, you’d be forgiven for thinking the law was something of a success. After all, the Obama administration claims to have insured some 20 million people (never mind that the figure includes Medicaid beneficiaries and young adults staying on their parents’ insurance). But while President Obama talks about all that Obamacare can give you, it is wise to remember what this law is already costing you.
Earlier this year, for example, we learned that Obamacare was responsible for $750 million in erroneous tax credits to individuals of unverified immigration status. Later that same month, a report from the nonpartisan Government Accountability Office found that the healthcare law doled out $68 million in subsidies for people in prison. Perhaps Obamacare’s most egregious waste, however, is the least reported: The failed experiment of the Obamacare “co-ops.”
Under Obamacare’s co-op program, the law created 23 nonprofit, consumer operated insurance companies; companies that received more than $2.4 billion in federal funding to get off the ground. Today, more than half of them have closed, wasting scarce taxpayer dollars and leaving families scrambling for coverage along the way.
That fact alone is plenty upsetting to taxpayers in my district, but the story is made worse when we consider the details of how these co-ops operated. In my home state of Tennessee, our co-op tried its hand at giving away free smartphones to prop up enrollment numbers until state regulators advised that the practice was against the law. The company would go on to shut its doors for good in the fall of 2015.
Similarly, the nation’s largest Obamacare co-op, located in New York, went belly-up last November – resulting in more than 200,000 customers suddenly without insurance and $200 million in unpaid claims for the state’s hospitals. Now, state agencies are conducting an investigation into the co-op for “substantial under-reporting” of its finances.
For the fraction of Obamacare co-ops that have remained in business, the prospects for continued viability remain dim. Co-ops based in Illinois, Wisconsin, Ohio and Maine lost about $270 million last year alone; more than quintuple their losses in 2014.
Congressional Democrats’ defense of Obamacare co-ops betrays a fundamental misunderstanding of how the markets work. They blamed these troubles on “deep funding cuts forced by the GOP” – because apparently $2.4 billion in government money to fund the launch of the program just isn’t enough.
Democratic presidential front-runner Hillary Clinton repeated this same debunked argument earlier this month, telling an audience at a Fox News town hall, “We need to get more companies, more nonprofits, to fill this space. The [co-ops] that knew what they were doing have provided good services, but a lot of them have failed because they didn’t have the right support.”
Unfortunately for Secretary Clinton and congressional Democrats, the hard truth is that the Obamacare co-ops’ reasons for failure are embedded in the program’s design, which is why I previously carried legislation to repeal this system in its entirety.
First, the bureaucrats who drafted the co-op program decided it was a good idea to make prior experience in healthcare delivery a disqualifying factor in determining eligibility for a loan. The Centers for Medicare and Medicaid Services rule stipulated that an organization cannot apply for a co-op loan if it was a “pre-existing insurer.”
Evidently no one in the Obama administration thought that, when launching a grand, taxpayer-funded experiment in health insurance, it might be beneficial to at least allow participation for those who have done this before.
Second, the program fails to offer members a stake in these co-ops’ long-term success. Co-ops work in other scenarios – be it a farmers’ co-op or a utility co-op – because every participant has skin in the game. In other words, they are viable because members have a vested interest in ensuring that is the case. Under Obamacare, however, these 23 co-ops have, to date, been supported by air-drops of taxpayer dollars; money we won’t be getting back any time soon.
In the private sector, a 50 percent failure rate typically results in finding a new job, but under Obamacare it is apparently license to press forward with a broken program and reason to continue throwing good money after bad. Already, Obamacare co-ops’ financial woes have spread to the state exchanges, where collapsed marketplaces in Oregon, Hawaii, New Mexico and Nevada have cost taxpayers $733 million. Left unaddressed, more co-ops and exchanges will fold and the problems will compound.
Congress has voted dozens of times with my support to defund, repeal, or delay Obamacare both in part and in full. Earlier this year, we finally got the Senate to join us in that effort; advancing an Obamacare repeal bill all the way to the President’s desk for the first time since the law was enacted. As expected, however, President Obama vetoed the measure.
With a willing partner in the White House, we can move these efforts across the finish line and erase this fatally flawed health care once and for all, including its crony co-op program. Both are failing the members who buy into them and the taxpayers, who are ultimately left holding the bag.
