Hearing blames lack of oversight, inability to compete for CO-OP failures

A lack of oversight when implementing the consumer operated and oriented plans (CO-OPs) as well as their inability to compete are to blame for the small insurers' recent string of failures, experts said Thursday at a hearing held by the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations.

To date, 12 CO-OPs have closed, which brings the total cost to taxpayers to more than $1.23 billion, the subcommitee said in its announcement. Gloria L. Jarmon, deputy inspector general for audit services at the Office of Inspector General, said in her testimony that the Centers for Medicare & Medicaid Services (CMS) urgently needs to address the CO-OP closures.

"Given the growing concerns about the financial viability of CO-OPs, it is critical that CMS provide the necessary guidance to improve program oversight and protect taxpayer dollars from significant losses," Jarmon said.

In the past few weeks, some have cited poor CO-OP design, provisions that did not allow for growth, and the many changes the Affordable Care Act imposed on individual and small group health insurance markets as possible reasons for the failure of the startup insurers. Others have argued that CO-OP budget cuts have made it difficult for them to compete with the larger insurance companies in any given state. 

In his testimony, Dr. Peter Beilenson, president and CEO of the Evergreen Health CO-OP in Maryland, agreed that the struggle to compete is a major obstacle.

"Several requirements and regulations developed by CMS ... at their discretion, not as required by provisions of the ACA, are significantly impeding the ability of the 11 remaining CO-OPs, including Evergreen, to successfully innovate and compete with the few carriers left on each state's respective insurance markets," Beilenson said.

Now, the important issue is doing whatever can be done to prevent future CO-OP closures, Sen. Ben Sasse (R-Neb.) said at the hearing.

"This is about getting to the bottom of what's actually going on and why so many of our neighbors are losing their healthcare coverage," he said.

To learn more:
- read the Energy & Commerce Committee announcement
- watch the hearing's webcast