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November 04, 2015

Failure of Health-Care Co-Ops Refuels Obamacare Debate

More than half of the nonprofit health insurers established with federal assistance under the Affordable Care Act have now gone under, adding fire to the partisan dispute over the health-care law, The New York Times and The Washington Post report. Consumers Mutual Insurance of Michigan announced Tuesday that it will not sell policies in 2016, becoming the 12th of the 23 state-level, consumer-owned providers to shut down this year, most of them in the past three months.

The co-ops, as they are known, were intended to compete with traditional insurers on state-run exchanges in hopes of holding down premiums. They have been plagued by losses, with the recent run of closures triggered by a federal decision to pay far less than anticipated in subsidies to the co-ops for taking on sicker, more expensive patients.

Mandy Cohen, chief operating officer at the Centers for Medicare and Medicaid Services, told a congressional subcommittee Tuesday that the shutdowns reflect "the inherent risks of building a business from the ground up." She noted that Congress had erased more than half of the $6 billion in federal loans the administration sought to bolster the fledgling insurers, a point also taken up by committee Democrats.

Republicans said the co-ops' struggles represent a failure of Obamacare, which the GOP has tried dozens of times to repeal. Rep. Kevin Brady, a Texas Republican, said the program is fundamentally flawed because it is “artificially trying to inject competition in the market through shoddily designed start-ups."