A congressional subcommittee held a hearing Thursday to examine the health insurance co-op loan program established by the Affordable Care Act. The program provided $2.4 billion in taxpayer-backed loans as seed money for the co-ops, which are private companies that were originally intended to bring competition, choice, and innovation to the health insurance market. In spite of this seed money, co-ops are off to a rough start. Since their inception just over two years ago, 12 of the original 23 co-ops have closed due to financial concerns. Taxpayers aren’t the only ones at risk of getting left with the tab for the co-ops.
A co-op left doctors and hospitals in Iowa and Nebraska holding over $80 million in unpaid claims when it closed. Worse still, consider that unpaid claims left behind by failed insurance companies are often allocated by state guaranty funds to the surviving insurance companies, who ultimately pass them on to consumers. One way or another, you’re likely to pay for any obligations the co-ops can’t meet. The co-ops’ leaders don’t offer much comfort, either. One co-op CEO recently offered this assessment of the co-ops’ prospects for re-paying their loans: “Will there be a little money left? Yeah, maybe.” Fortunately, the surviving co-ops have an often-overlooked asset they can tap to stay in business and meet their obligations: the recovery rights to their overpayments.