Obamacare Co-Ops Doing a Fukushima

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Published on: June 20, 2015

Obamacare — the gift everyone pays with very few receiving benefit. For many, it comes as no surprise that 22 Obamacare co-ops are experiencing signs of imminent financial collapse that would leave a million Americans without insurance. According to the Daily Caller, all but one operates is experiencing “accelerated net losses.” One co-op failed late last year leaving 120,000 individuals without coverage. Just how bad is the problem?

The co-op that failed last year suffered $163 million net loss in a single year. According to Thomas Miller, a resident health care fellow at the American Enterprise Institute, there will be fewer co-ops at the end of this year. Marie Grace Turner, president of the Galen Institute, and Miller compiled new figures that indicate net losses for the co-ops “reached a record $614 million in 2014.” The previous figure, compiled by Standards & Poor and released in February 2015, established losses for the first three quarters of 2014 as $234 million. The new figure is three times that previously calculated meaning Obamacare co-ops are experiencing a quickening burnout.

Insurance ratings firm A.M. Best also warned in January that as of September 30, 2014, “the ratio of surplus notes outstanding to capital and surplus exceeded 100% for all of the co-ops.”

Arizona’s Meritus Mutual Health Partners co-op has long-term loans that are nearly 1,000 percent of the value of its capital and surplus, according to A.M. Best.

S&P identified the co-ops suffering the worst capital ratios as those in Illinois, Arizona, Colorado, Nevada and Maryland.

The Community Health Alliance co-op in Tennessee reported that its net losses were 314% of its federal funding, according to the S&P report.

Community Health said in January that it would no longer offer insurance on the state exchange, according to the Tennessean daily newspaper. The co-op enrolled 140 customers and received $73 million from Obamacare, a cost of more [than] $521,000 per enrollee.

Another indication of serious co-op financial weakness is the fact that CMS gave out $317 million in additional “solvency loans” to one of every three co-ops last year.

These are American tax dollars at work. CMS had to inject federal funds into the co-ops to keep the capital reserves from dipping below the minimum set by the individual state insurance commissioners. However, this was no surprise to the feds since the White House Office and Management and Budget estimate forecast it. It warned, “Four of every 10 co-ops could default.”

Regulators in Iowa and Nebraska liquidated the assets of failing federal health care co-op Co-Opportunity Health earlier this year, declaring the “co-op was in ‘hazardous condition’ in December.” Co-Opportunity Health initially enrolled 50,000 customers — the nation’s second highest in enrollment — earning supporters. While CEO for Co-Opportunity, David Lyons, who is a former Iowa Insurance Commissioner and well-connected politically, was pleased with “market response to their products, he failed to disclose that Co-Opportunity “slashed prices and offered very low, below-market premiums to attract new customers.” This cost Co-Opportunity. For every one dollar collected in premiums, the co-op paid $1.40 in medical claims, resulting in a ratio of cost to premium of 140 percent.

Co-Opportunity Health ended up dumping “more than 10,000 of its poorest and sickest customers and transferring them to the state’s Medicaid program.”

What was it the Obama administration said about this “health care” program? It was supposed to be affordable while providing “high quality” insurance options and being consumer friendly. Being dumped into the Medicaid program doesn’t sound very “consumer friendly.” In fact, Sally Pipes, an Obamacare critic and president of the Pacific Research Institute think tank, described it as “totally, absolutely immoral.”

Co-Opportunity’s operating loss of $163 million resulted in 120,000 individuals losing coverage. However, Co-Opportunity losses were not the worst, if you can believe it. According to S&P, “Obamacare co-ops in Utah, Colorado, Michigan, Tennessee, Maryland, Oregon, Connecticut, Illinois, Arizona, Massachusetts and Nevada” suffered more losses that Co-Opportunity.

What exactly is the problem here? CMS spokesman Aaron Albright explained the financial dilemma shared by all co-ops.

Unlike traditional insurance companies, Obamacare from the start restricted the co-ops from regular access to conventional credit markets. They cannot obtain short-term bridge loans, offer stock, seek equity or other forms of private capital. All the co-ops are funded with federal tax dollars.

It boils down simply. They were restricted from the ability to obtain funds through options available to private insurance companies, meaning reliance on the feds. As long as the federal government poured money into the co-ops, the co-ops stayed afloat. Once the free cash flow stopped, no taxpayer bailouts occurred, and they couldn’t procure more loans, the co-op sank.

As has been previously stated, this was a set-up for failure. It’s simple math. If you have more going out that you have coming in, you run a deficit. However, that is how the government operates everything so they knew these co-ops would fail based on how they were set up.

Thomas Miller advised individuals in Iowa and Nebraska to “get out now.” He warned the co-ops are precariously perched that may result in rapid failure. He said, “These things could suddenly explode and leave a lot of injured parties to clean up.”

Miller pulled no punches. This amounts to the Obamacare co-ops going Fukushima. The government knew this would happen, continued forward with this unconstitutional monstrosity, formulated not one alternate avenue, and likely knew consumers would be “dumped” into state Medicaid programs or worse, left without insurance entirely meaning paying an IRS penalty. Both sides of the aisle in both chambers of Congress had to know this. Yet, Congress took no serious action to rid America of this “meltdown” of the health care insurance industry and the health care system.

Congress and Obama are not in the “reactor” alone. The States bear some responsibility as their duty rested in nullifying unconstitutional legislation since the law “mandated” every individual to purchase a product — health care insurance — outside of the enumerated powers. Moreover, the enumerated powers to the federal government do not identify an authority over the health care industry or health care insurance industry. Instead, citizens of this nation pay the price with cancelled policies, higher premiums, and deductibles, paying for coverage they don’t need and services for others, such as birth control, abortion, etc., and now, being “dumped” into state programs because of the “meltdown.”

An ingenious hatched plan it was to usher in socialized medicine or the “Republican plan,” which is more than likely to fail as well. It leaves the US going backward in time, instead of forward, when it comes to health care and health care insurance. As it looks right now, all roads lead to government controlled health care.

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