Much of the focus on health insurers under the Affordable Care Act (ACA) has centered on larger health insurance companies. In an effort to expand the number of health plans available to the public, the ACA also created the Consumer Operated and Oriented Plan (CO-OP) Program. The program is administered by the Centers for Medicare and Medicaid Services (CMS) at the Department of Health and Human Services (HHS). The ACA further directed HHS to make loans to these CO-OPs to assist with their establishment and financing. Now the HHS Inspector General (IG) is warning that these CO-OPs are not meeting their financial and enrollment goals and this might limit their ability to re-pay their loans.
To receive loans under the program, CO-OPs submitted applications that included enrollment and profitability projections. During the CO-OP establishment period in 2013, the IG issued two reports, on June 16, 2013 and July 30, 2013, examining, among other things, the loan selection process and other issues that could adversely affect the program.
For this report, the IG conducted an audit of 23 CO-OPs and determined that most of them “had not met their initial program enrollment and profitability projections as of December 31, 2014.” Specifically,
member enrollment for 13 of the 23 CO-OPs that provided health insurance in 2014 was considerably lower than the CO-OPs’ initial annual projections, and 21 of the 23 CO-OPs had incurred net losses as of December 31, 2014. Year-end net income data were not available for the Iowa/Nebraska CO-OP as the Iowa Insurance Commissioner took control of the CO-OP in December 2014 because of financial concerns. The Iowa/Nebraska COOP was liquidated in March 2015. Specifically, member enrollment for 13 of the 23 CO-OPs that provided health insurance in 2014 was considerably lower than the CO-OPs’ initial annual projections, and 21 of the 23 CO-OPs had incurred net losses as of December 31, 2014.
The IG Report recommended that CMS:
- continue to place underperforming CO-OPs on enhanced oversight or corrective action plans, in accordance with Federal requirements;
- work with State insurance regulators to identify and correct underperforming CO-OPs;
- provide guidance or establish criteria to determine when a CO-OP is no longer viable or sustainable; and
- pursue available remedies for recovery of funds from terminated CO-OPs, in accordance with the loan agreements.
CMS concurred with the recommendations.