Obamacare’s Co-Ops Are Crumbling

by Alec Torres

Health-care co-ops that were established under the Affordable Care Act to provide a nonprofit alternative to major health-care insurers and promote greater competition are facing funding pitfalls and potential closures. According to a Washington Post report, these co-ops — different from traditional insurers because they have nonprofit status and are run by a board of policyholders — have faced cuts in government funding and prohibitive red tape, meaning they may soon have a hard time paying back their taxpayer loans, with nearly $1 billion in taxpayers’ money at risk.

Thus far, one co-op has closed, another is struggling, nine more have projected financial problems. Forty applications for the program were withdrawn because of funding cuts.

During the congressional debates preceding the passage of Obamacare, co-ops were suggested as an alternative to the unpopular public option as a way to spur competition while leaving the actual provision of insurance out of government hands.

Concerned that funding for the co-ops would be tantamount to a government handout, Congress decided to offer the entities loans, but the size of loans were soon cut and regulations were added prohibiting government funding from being used for advertising and preventing co-ops from offering insurance to large employers. Eventually all other government funding was eliminated, leaving the co-ops to survive on their own with limited government support, a task they’ve struggled at.

Despite the bleak prospects, officials of three co-ops in Maryland, New York, and New Jersey interviewed by the Washington Post said that they were optimistic about their finances and ability to repay the federal loans.

But if the co-ops, faced with elimination of federal funding and burdensome government regulations, do fail, their unpaid loans will have come at the taxpayers’ expense.

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