Commentary

Consumers and Co-Ops Continue to Struggle Under the ACA

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Years after its implementation, the Affordable Care Act (ACA), or ObamaCare, continues to hinder healthcare markets and insurers as it wrangles millions of American consumers into paying bloated premiums and deductibles for substandard quality healthcare coverage.

This catastrophic law has led to billions of dollars being misappropriated or wasted on failed healthcare exchanges established by the federal government and has put countless co-ops out of business. Unfortunately, fallout of the ACA has extended its reach all the way to Maine.

Community Health Options (CHO), a health insurance co-op out of Lewiston, is suing the federal government for $22.9 million to offset losses occurred in the fiscal year of 2015. In total, CHO reported $31 million in losses for 2015. CHO conducts its business primarily in Maine, but extends coverage under ACA plans to residents in New Hampshire as well.

When it opened its doors in 2014, CHO turned a profit, but suffered bruising losses in 2015 and now claims the federal government owes them for their deficits under the temporary risk corridors program.

The program was established as part of the original law to help insurers manage costs, profits and losses as they transitioned into providing coverage options under the ACA. The program works by insurers paying in a portion of their profits if they experience lower-than-anticipated costs in a given year and receiving payments to help offset losses in return if they experience higher-than-anticipated costs.

However, the deviation over the few years the law has been in effect has left many co-ops in a vulnerable position. The losses they suffer heavily outweigh the profits they collect, and many have received nothing from the federal government to help offset their losses. This is likely because more co-ops are experiencing higher-than-anticipated costs rather than lower costs, resulting in larger deficits than the federal government can offset.

CHO paid in $2 million to the risk corridors program in 2014 when the co-op had $7 million in profits, but has received nothing yet from the federal government for 2015. Other insurance co-ops have sued the federal government under this program, but the federal government contends the program is designed to be budget-neutral, meaning the offsetting payments during years of losses can only equal the amount of money paid in during years of profit. Highmark, a wing of Blue Cross and Blue Shield out of Pittsburgh, claims the federal government owes them $223 million under the risk corridors program.

“They will argue that it’s budget-neutral, but there’s no basis for them doing so,” Kevin Lewis, chief executive officer of CHO told the Portland Press Herald.

Executives like Lewis assert the language of the law does not specify the program being budget-neutral and that co-ops can only receive what they pay into the program. If a judge were to side with the cooperative in any of these cases, the federal government could be obligated to pay out to thousands of companies that expanded coverage under the law.

Without the offsetting payments from the federal government, many co-ops do not have the financial stability to stay in business. By participating in the ACA exchanges and taking on the financial burden of offering expanded coverage to the previously uninsured, co-ops like CHO are experiencing crippling losses when customers reach their out-of-pocket costs for the year and the cooperatives become obligated to pay the remainder of healthcare costs.

This conundrum is yet another example of failed liberal policies that hurt economic growth over the long term and wrap spools of bureaucratic red tape around the throats of producers and consumers alike.

About Jacob Posik

Jacob Posik, of Turner, is a policy analyst for the Maine Heritage Policy Center. He can be reached at jposik@mainepolicy.org.

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