How are New CO-OPs Faring on Exchanges?

The Washington Post reports on the uncertain futures Consumer-Operated and Oriented Plans (CO-OPs) are facing now that exchanges have officially launched, but are off to a rocky start. While the debut of the Affordable Care Act this month has been marred by widespread computer problems, the difficulties the CO-OPs face have been less obvious to consumers. One CO-OP, however, has closed, another is struggling, and at least nine more have been projected to have financial problems, according to internal government reviews and a federal audit.

Their failure would leave taxpayers potentially on the hook for nearly $1 billion in defaulted loans and rob the marketplace of the kind of competition they were supposed to create. And if they become insolvent, policyholders in at least half the states where the CO-OPs operate could be stuck with medical bills.  

Although the CO-OP plan originated in the Senate, resistance to the initial proposal quickly materialized on Capitol Hill, in part because of pressure from insurance industry lobbyists.  So Congress saddled its new creations with onerous restrictions that, experts say, doomed many CO-OPs to failure. Federal grants for the CO-OPs were converted to loans with tight repayment schedules; they were barred from using federal money for crucial marketing; and they were severely limited from selling insurance to large employers, which represent the most lucrative market.  And sequestration at the end of 2012 cut off any funding for additional CO-OPs, leaving start-up organizations that had invested significant resources hanging with no future.