Ben Sasse: I’ll block nominees until HHS explains Obamacare co-op failures

Pressure is mounting on the administration to account for the cascading failure of Obamacare’s co-op program, where more than a third of participants have gone bust, leaving taxpayers on the hook for billions of dollars in federal loans.

The co-ops, or Consumer Operated and Oriented Plans, are nonprofits set up under the Affordable Care Act as alternatives to big insurance companies. They began to offer subsidized insurance coverage as of January 2014.

But eight of the 23 that were established went gone belly-up. Co-ops in Tennessee, Colorado and Oregon last week joined others that failed in Kentucky, New York, Nevada and Louisiana, plus a joint operation in Nebraska and Iowa.

Sen. Ben Sasse, Nebraska Republican, said Monday that he would block any political appointees to the Health and Human Services Department until the administration explains the failures.

“Hundreds of thousands of enrollees lost their plans when co-ops in nine states collapsed, and these victims deserve clear and honest answers from the bureaucrats who oversaw the mess,” Mr. Sasse said.

Pundits warned that the co-ops would have a hard time competing for market share, and government auditors found that to be true.

The HHS inspector general said the co-ops lost hundreds of millions of dollars in their first year and didn’t attract anywhere near as many customers as they hoped, leaving many of them in danger of default.

Health care customers searching for plans from the Community Health Alliance Mutual Insurance Co. of Tennessee are now greeted by a stark message: The alliance “is not offering plans in 2016.”

In Oregon, Health Republic Insurance says its plans are valid through the end of the year but consumers should turn to the federal HealthCare.gov site to buy coverage for next year. State regulators in Colorado shut down the Health Insurance Cooperative there, forcing its members to scramble to find alternatives for next year.

Open enrollment for 2016 coverage on Obamacare’s exchanges begins Nov. 1, and the Centers for Medicare and Medicaid Services says helping enrollees stay covered by switching from defunct co-op plans to other marketplace plans is a top priority. It also said there are inherent risks to starting co-ops and that “unfortunately, as with any startup enterprise, not all will succeed.”

Analysts say a set of factors has doomed the co-ops. Some simply set their prices too low, resulting in debilitating losses when claims far outweighed premiums.

“Since the health status of exchange enrollees was relatively unknown when the program began, plans struggled to set competitive prices that would attract enrollment but still be high enough to cover costs,” said Caroline Pearson, senior vice president at Avalere Health, a Washington-based consultancy.

Others said Congress’ decision to prevent co-ops from spending federal funds on marketing sped their demise.

For their part, the co-ops said they were expecting more taxpayer money to shore them up in the early going. They have requested $2.87 billion but will get only $362 million.

Insurers can be made whole in later years. But if there is still a shortfall, HHS is unlikely to free up additional cash from congressional Republicans who deride the program as a taxpayer-funded bailout.

Kelly Crowe, CEO of the National Alliance of State Health CO-OPs says its members are “exploring any and all options to ensure the federal government lives up to its promise to fulfill its obligations under the risk corridor program, including legal action.”

“Though HHS has stated it is committed to making all requested risk corridor payments over the three-year life of the program, for CO-OPs and other small insurers, three years is simply too long to wait,” she said.

In the meantime, Mr. Sasse said, he will begin his blockade of HHS appointments with Karen DeSalvo, who has been nominated to serve as the department’s assistant secretary.