The quiet blow that Republicans dealt to Obamacare in the so-called CRomnibus spending bill passed last month has now helped contribute to the shuttering of one of the law’s co-op health plans, as experts told TPM it might.
Iowa Insurance Commissioner Nick Gerhart announced Monday that his office would request that CoOpportunity Health, a non-profit health plan created under the health care reform law, be liquidated. Gerhart’s office had taken over control of the plan in December amid financial struggles, per the Wall Street Journal.
Part of the reason that the insurance commissioner took over the struggling insurer, and therefore part of the reason it is now being shut down after state officials determined it couldn’t be saved, is a provision that House Republicans inserted into the spending bill approved in December.
As TPM reported at the time, House GOP staff requested a change to Obamacare’s so-called risk-corridor program as part of the CRomnibus. The program, a favorite punching bag of Republicans, who have pushed for its repeal, is designed to help insurers in the law’s first few years. Companies estimate what their insurance pools will look like. If they turn out better than expected, then the companies pay money into the program. If they turn out worse, then companies are paid money by the program.
That helps lessen the risk for insurers as they take on a new population of Obamacare enrollees. But what the Republicans inserted into the CRomnibus was a requirement that the risk-corridor program effectively be revenue neutral. So if the program didn’t bring in enough money from overperforming companies, it wouldn’t be able to make payments to underperforming ones.
Experts told TPM at the time that bigger companies would likely be able to absorb any short-term losses that might come with the change, but that smaller insurers — like CoOpportunity Health, which covers about 68,000 people in Iowa and Nebraska — would be more vulnerable.
When Iowa insurance commissioner Gerhart petitioned to take over the company in December, he cited the uncertainty of the risk-corridor money as one reason for CoOpportunity Health’s struggles, stating that the CRomnibus provision had “placed in jeopardy” up to $60 million of the company’s projected assets.
Becky Blum, a senior official at the Iowa agency, confirmed to TPM in an email that the CRomnibus provision had been one of the factors in the company’s financial instability, though not the only one. The bottom line was that the insurer was paying out too much in claims and not bringing in enough revenue.
But that is exactly the problem that the risk-corridor program is designed to address and, because the revenue for CoOpportunity wasn’t guaranteed after the spending bill, it put the company’s long-term solvency further into doubt.
“The potential limitation on recouping the risk corridor money complicated the company’s ability to put forward a plan of viability,” Blum said.
That was the fallout that Obamacare supporters warned about when the CRominbus passed.
“The risk corridor program was established specifically to assist insurers, like the coops and other new entrants, who face difficulties in setting premiums accurately for the first couple of years of their existence because they lack previous experience,” Tim Jost, a health law professor at Washington and Lee University who supports the law, told TPM. “Congress should have realized that by limiting funding for the risk corridor program, it would likely be driving some insurers into insolvency.”