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Obamacare Co-Ops Program Going Extinct Because They Don’t Work

The opinions expressed by columnists are their own and do not necessarily represent the views of

Obamacare co-ops were liberals' consolation prize in the health care wars of the early Obama presidency and the cover for progressives when they lost on establishing a "public option.” The so called “public option” was the left’s brazen plan to foist an immediate and total government takeover under the guise of consumer choice. They settled for wasteful Obamacare Co-Ops that are experiencing the final spasms of existence.
The public option was full blown socialism and the co-ops were a pilot plan to grease the skids for a future public option. The relatively limited scope of co-ops has provided a measure of obscurity for this failure. Americans would not feel so warm and fuzzy about “Medicare for All” if they saw how co-ops wasted billions in taxpayer cash.
The relentless failure of Obamacare co-ops in the nearly nine years since Obama fundamentally transformed our country’s health care system is a pathetic story, deserving of much more scrutiny. Of 24 co-ops founded with the generous helping hand of Uncle Sam's Obamacare money, only seven remain. The rest already went belly-up, and with them billions of dollars in taxpayer "loans" down the drain of Senator Bernie Sanders’ (I-VT) supported plan.
One of the remaining co-ops, New Mexico's Health Connections, is clearly about to go under. In a bout of obvious desperation, the organization filed a lawsuit alleging the Centers for Medicare & Medicaid Services (CMS) is intentionally stacking the rules against it. For most people examining the issue, the problem is Health Connections' burgeoning fiscal risk. But according to Health Connections, CMS is trying to stop them from doing good in the world – even though co-ops are collapsing throughout the nation because they are money pits of inefficient delivery of health care services.
In typical blame-the-victim rhetoric, the New Mexico entity is trying to blame everybody but themselves for a failed attempt at setting up a co-op. "CMS is exacting this unfair financial penalty against Health Connections for lowering prices to small businesses and consumers and making healthcare more affordable for New Mexicans," the company said in a press release.
Ironically, CMS has been an exceptionally docile debt-holder. For example, in 2015, CMS allowed Health Connections, the other three remaining currently surviving co-ops, and eight other since-departed co-ops to convert hundreds of millions of dollars in government loans to "surplus notes." Essentially, the government downgraded its legal claims to the issued debt to the lowest possible legal category, allowing the co-ops to magically convert liabilities to assets for accounting purposes. Even this accounting gimmick could not save the New Mexico experiment with co-ops.
Even though the loans are being paid (or not paid) late, the happy talk coming from New Mexico indicates that they believe that somehow they can turn the corner and stop hemorrhaging taxpayer cash. "We...are on track to completely repay those loans on schedule," Health Connections cheerfully says on its website, which is interesting because the deadline for $10.7 million in loans issued in 2013 was . . . 25 days ago. Since then nary a peep has been issued by the company or CMS about repayment.
Unfortunately, fellow taxpayer, the situation appears quite grim regarding the fate of our loans to this company, whose CEO, Dr. Martin Hickey, was paid a salary $450,000 in the period when the firm began to circle the toilet bowl, according to tax forms. According to its financial statements, Health Connections is losing roughly $500k a quarter. As of June 30, it had $1.2 million remaining in capital, or 11.2% of the funds it was supposed to pay back at the end of last month.
According to state law, regulators should have long-since seized the company for its staggering risk-based capital rating, estimated to be 30%, less than half the minimum permitted 70%. The New Mexico example is not unique, and it is sad that other co-ops are also wasting cash.


It is time to end taxpayers subsidized co-ops.  The federal government is trying to find ways to make health care more affordable, and co-ops are not the answer.  The bottom line is that the failed experiment of co-ops being the example to the American people of how full-blown socialism works proves that the “public option” would have been an even bigger disaster.  “Medicare for All” may be a rallying call for progressives and left leaning voters, yet the failure of co-ops since the establishment of Obamacare proves that a socialist health care system can’t work.

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