#9: CO-OPs – Half empty or Half Full?
In 2013, the Briefing Room reported on the potential pitfalls of launching Consumer Operated and Oriented Plans (CO-OPs) in every state. In less than two years, the warnings are now coming to fruition. 12 out of the 23 CO-OPs have closed their doors and will not exist in 2016 leaving over 740,000 consumers looking for a new health plan.
Initially, Co-Ops were allotted $6 billion in federal funding. Funding quickly fell to roughly $2 billion leaving only 23 CO-OPs to actually formed. The ones that have failed highlight a multitude of reasons:
- Reduced federal funding
- High administrative startup costs
- Average rates for CO-OP Health Plans were lower than those of other Health Plans in more than half the rating areas (THIS ISNT CLEAR)
- Poor Federal/State oversight, and lastly
- Board members ill-equipped to have fiduciary responsibility for a health insurance company.
Many believe irrational pricing led to the downfall of these CO-OPs. In fact, the United States Government Accountability Office issued a report in April 2015 showing how the average pricing for CO-OP health plans were lower compared to the other health plans they competed against.