House Republicans take aim at health CO-OPs

Not satisfied with having cut nearly half of the $6 billion allotted under the Affordable Care Act to help create health CO-OPs, the House Energy and Commerce Committee last week voted to defund the remaining $3.4 billion in the program.

In a letter sent last week to the Centers for Medicare & Medicaid Services’ Acting Commissioner Marilyn Tavenner, House Republicans cited their concerns over the ability of the newly formed Consumer Operated and Oriented Plans (CO-OPs) to pay back start up and solvency loans made under the program.

Specifically, House lawmakers are seeking to learn whether the loans – some of which are intended to satisfy state insurance regulators’ cash reserves requirements – will actually be treated as reserves and not liabilities. In addition, HHS has indicated that in recognition of this potential problem, the loans may need to be classified “surplus notes” since they are the only type of loan many states will recognize as assets.

This classification may expose the program to bigger losses than originally forecast said the signers of the letter, which include committee Chairman Fred Upton (R-MI), Cliff Stearns (R-FL), Chairman of the House Subcommittee on Oversight and Investigations, Joseph R. Pitts (R-PA) Chairman Subcommittee on Health and Marsha Blackburn (R-TN) Vice Chairman Subcommittee on Commerce, Manufacturing and Trade.

“Because the CO-OP regulation does not specify any collateral for the loans… holders of surplus notes are usually at the bottom rung in terms of priority if an insurer goes into rehabilitation or liquidation, the Federal taxpayer would be last in line for repayment should a CO-OP experience financial distress,” the letter stated.

But supporters of health CO-OPs say they are deserving of getting a leg up through federal assistance and are part of the solution to reigning in high healthcare costs and insurance rates.

Others view the recent House action as just more attempts by Republicans to slowly dismantle ACA while dressed in the guise of protecting taxpayers.

Terry Gardiner, vice president of policy at the Small Business Majority, who served on a CO-OP advisory board that helped the Department of Health and Human Services design the program, said in a report published in Politico that there is no way of knowing exactly what the failure rate will be for the CO-OPs because there is not enough information on them.

“There are plenty of naysayers,” Gardiner said. “But you have to be an optimist and a problem solver to get a business started. That’s what these CO-OPs are doing.”

To date, HHS has funded 10 CO-OPs under the program at a cost of $845 million.