Letter to the editor submitted by Sean Goldrick, July 7, 2016
Hartford Courant’s article announcing the demise of the Connecticut health co-op HealthyCT (Nonprofit Obamacare Insurer In Connecticut Going Out Of Business, July 5) failed to tell Courant readers the real reason it is going under: The sabotage of the co-op system by congress.
HealthyCT provides health insurance to more than 40,000 Connecticut residents. Nationwide, co-op’s insure more than a million Americans.
The non-profit co-op’s were created by the Affordable Care Act in 2010 after the Republicans, joined by then-Connecticut Senator Joe Lieberman, killed off the so-called “public option” through a filibuster. The non-profit co-op’s were created to provide affordable health care at the local level, keeping costs down through competition with big for-profit insurers.
The co-op system was originally estimated to require $10 billion in government start-up capital in order put the system on a stable footing. But that $10 billion in capital was cut to just $2.4 billion. Then the capital was changed to loans that required repayment, putting serious pressure on the co-ops through higher debt service. Ultimately, instead of scores of co-op’s, only 23 actually received federal funding. Further, to protect for-profit insurers from competition, congress forbade the co-op’s from using their funding for marketing. They were also prevented from competing for the lucrative business of insuring employees of large corporations.
Bluntly calling it “sabotage,” Professor Jeremy Johnson of Carroll College pointed out that, “The big blow (to co-op’s) was when the Republicans in Congress stymied the co-op insurers by adding a provision to a budget agreement in December 2014 preventing the government from making the ‘risk corridor’ payments that insurers on the exchanges were expecting and remain legally entitled to receive.” The Center for Medicare and Medicaid Services ended up paying out just 12.6% of the expected risk corridor payments last year, leading to the closing of more than half of the co-op’s at the end of the year. Al Redmer Jr., Maryland’s insurance commissioner and former CEO of insurer Coventry Health Care of Delaware, in testimony to congress, stated that, “the flawed risk-adjustment program and lack of risk corridors funding would handcuff any small business that is trying to get off the ground….Congress is setting up carriers around the country to fail.”
Not only have co-op’s been starved of critical funding, they are also being required to make major payments to their competitors. In fact, it is precisely because HealthyCT is being required to pay $13.4 million to the CMS that the co-op’s financial position has been “destabilized,” and is causing its shutdown. HealthyCT isn’t the only co-op that the government is forcing out of business with these payments. Maryland’s Evergreen Health Cooperative has been told it must make a $22 million risk adjustment payment. Its CEO, Peter Bellenson, told Bloomberg News that If Evergreen is required to make that payment, “We’re dead.” And in May, the Ohio co-op Coordinated Health Mutual was also forced to close when it was required to make a $3.4 million “risk adjustment” payment.
Hartford Courant quotes Grace-Marie Turner, president of the conservative Galen Institute, as saying that the co-ops’ increasing failures “is an indictment of the idealistic notion that you could put people in charge of billions of dollars who have little or no experience in the insurance industry.”
In fact, as Brookings Institute’s Thomas Mann pointed out, “Many co-ops were run by real pros with decades of experience.”
Indeed, the co-op’s were initially very successful. Mann revealed that, “co-ops were offering the lowest premiums in a third of the states in which they operated. And even when they weren’t the lowest, they were providing enough competition to drive down all premiums by 8 percent.”
Contrary to the Courant’s assertion, HealthyCT is not closing because it is a non-profit; it is closing because congress deliberately sabotaged HealthyCT and the entire co-op health system.
Sean B. Goldrick
Sean Goldrick is a Riverside resident who most recently served as a Democratic member of the Greenwich Board of Estimate and Taxation.