It’s like Groundhog’s day in the world of Obamacare co-ops.
I’ve reported several times here at HotAir and elsewhere about the struggles Obamacare CO-OPs-ops and state exchanges are facing in the real world, and the latest news out of Massachusetts seems to suggest that the trend of failing co-ops will continue. Minuteman Health, the Massachusetts CO-OP (which stands for consumer operated and oriented plan) is a non-profit insurer that was supposed to provide lower-cost insurance in local markets, but according to the latest estimates, Minuteman is facing serious financial issues.
CO-OPs like Minuteman rely on having enough members to offset their costs, which as start-up health care organizations, can be quite substantial. Minuteman estimated that they need roughly 40,000 members “just to break even,” and expected to sign-up 30,000 in their first year. Instead, they signed up less than 2,000 their first year. Last year they reached 14,000 (only 35 percent of their breakeven enrollment) and they hope to have 23,000 by the end of 2016, which is likely overly optimistic given the markets they are operating in.
Minuteman was one of the 23 insurers launched two years ago as part of Obamacare, with $2.4 billion in seed money from taxpayers. Minuteman got $156 million to get off the ground, a now they’re facing the same struggles that have led to more than half of the CO-OPs shutting down.
In yet another moment of candor, Massachusetts’ most notorious health advisor, Jonathan Gruber, said that “the CO-OP program was a risky venture from the outset, given how difficult it is for new companies to develop provider networks and compete with established insurance companies. But he said it was a risk worth taking,” because “it could pay off by giving consumers access to affordable insurance.”
Access to affordable insurance was the selling point for all of Obamacare, a plan that Gruber had a key role in creating, and passed because of, as he put it, “the stupidity of the American voter,” but it wasn’t voters who passed it and supported it.
As a board member of Massachusetts’ Health Connector, the state’s state-based exchange, Gruber oversaw a disastrous rollout and collapse of one of Obamacare’s most ballyhooed state marketplaces. What was supposed to be an easy way for people to sign up for affordable health insurance turned out to be a system that couldn’t perform as promised.
Now the Massachusetts CO-OP also looks doomed to fail. Between the collapse of the Connector, the resulting depressed enrollment, and millions of dollars in risk adjustment payments to companies like Blue Cross Blue Shield, Minuteman is struggling to stay afloat.
In order to keep prices down, Minuteman’s “network of doctors and hospitals excludes the state’s biggest providers, including Partners HealthCare and Beth Israel Deaconess Medical Center.” This may be one of the reasons for lower than expected enrollment.
The company’s former chief financial officer told the Boston Globe,
“In Massachusetts, the narrow network is an unpopular product,” Fallon said, “and the people who do pick it, it’s because they don’t anticipate any health care needs.”
In a previous interview, health care expert, Josh Archambault also told the Boston Globe, Minuteman has “a huge challenge to be long-term sustainable, and given the track record of the other co-ops around the country, there doesn’t appear to be others that have cracked the nut quite yet.”
Many of us warned that these co-ops couldn’t survive, regardless of how well intentioned they might have been. Progressives may try to manipulate the markets, and prop them up with billions in taxpayer dollars, but eventually they collapse.
If this trend of co-op failures continues it’ll only be a matter of time before I’m right back here reporting another failed Obamacare co-op – only the names and number of affected insured will change.