Why nearly half of the Obamacare co-ops have folded

As open enrollment begins for the health exchanges, one development that's turning into a concern is the collapse of a number of alternative insurance plans known as co-ops. Mary Agnes Carey of Kaiser Health News joins Judy Woodruff to answer real Americans’ questions about shopping for coverage.

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    Now to the second part of our look at the Affordable Care Act and health insurance coverage, as year three gets underway.

    This weekend marks the beginning of open enrollment in the health exchanges, and we're looking at some of the questions about costs and coverage. One development this fall that's turning into a concern for some consumers — a series of collapses of an alternative to traditional insurance plans, known as co-ops.

    Nearly a half of them, which were created through the Affordable Care Act, are now shutting down.

    I sat down to discuss this all yesterday with Mary Agnes Carey of Kaiser Health News.

    And Mary Agnes Carey is with us again.

    So, welcome back.

  • MARY AGNES CAREY, Kaiser Health News:



    Now, let's focus on these — this thing called co-ops. Remind us exactly what they are. And what did the administration want them to accomplish?


    As they were negotiating the Affordable Care Act, Democrats wanted a public option. They wanted a uniform option available to everyone across the country for health insurance. That wasn't going to happen.

    But, as an alternative, they created these independent, nonprofit co-ops that were to be an alternative to the traditional insurer. And it was to be an option for consumers.


    And they had — they believed this was going to cover a chunk of the uninsured out there?


    They absolutely did.

    But they ran into a few roadblocks. For example, in a budget deal a few years ago, the funding for co-ops was cut. There recently was an announcement from the Department of Health and Human Services they couldn't give these companies and others as much as anticipated to help offset some of the higher-cost cases. And that's where some of the co-ops got into trouble.

    Some of them were very popular. They were low-cost alternatives. That meant sometimes sicker beneficiaries came to them. And that's where some of the financial problems happened.


    Well, let's look, Mary Agnes, at a gentleman. He's — his name is Edward Azria. He lives in New York. He was in a co-op in Brooklyn, but then it collapsed. Let's hear from him.

  • EDWARD AZRIA, New York Resident:

    The premium and the deductibles were good, certainly for my needs, because I'm not habitually in the doctor's office for anything.

    And so it was easy to maintain, coming out and starting out on my own, to take that monthly payment where it was, without having it be too heavy of a burden going forward. And they provided everything that I needed.

    My biggest worry is that, to stay within the same price point, if it's even going to be possible, is the level of services going to be diminished because they have to make up for it? The price point of the co-op was obviously too good to be true.

    So, it is going to be interesting to see what they actually do come up with and if they're going to cut the services to make up for it.


    So, Mary Agnes, what does the administration do for someone like Mr. Azria?


    HHS Secretary Sylvia Burwell had a briefing with reporters. She was asked a few questions about the co-ops. She said, they're going to have special outreach to these folks.

    We're talking about 500,000 people or more in the 10 co-ops that have folded that are going to be out there looking for plans, reaching out to them, explaining to them how to look, how to navigate for their plans. And also they're trying to investigate what they might be able to do, they being the Department of Health and Human Services, either administratively or through the legislative process, to try to grant some relief to some of these co-ops. Because of course there are some that are still struggling financially.


    And do they think they are going to be able to find an option for someone like him at the same price point?


    I think they could.

    You have to remember that, in the Affordable Care Act, there are different tiers of coverage — bronze, silver, gold, and platinum. If he's interested in a lower monthly premium, a bronze plan might work for him. It may not be the exact same plan he had in his co-op, which he obviously really liked.

    But, again, that's where, whether you go on to healthcare.gov yourself, or you get assistance from a broker or an insurance agent, or work with many of the community groups that are kind of on the ground trying to help people find coverage, he's going to have to get in there and look what's covered. Are my doctors covered? Are my prescription drugs covered? How much does this plan cost in the premium? In the out-of-pocket costs? What's the total package, and how does it compare to what he had and what he can afford?


    Explain again, Mary Agnes, why a number of these co-ops just didn't make it.


    They had basically had solvency issues, financial solvency issues.

    If they were the lower price point, that tended to attract sicker beneficiaries. That would drive up their costs. They had anticipated fairly large payments from the federal government to help offset the cost of those sicker folks.

    But, of course, as we mentioned earlier, there was a change and their funding was cut early on in the inception of the co-ops. And then, secondly, there was another legislative change that adjusted the amount of money that the federal government could pay them.

    It's a program that says: If you have a lot of healthier beneficiaries, you pay in. And that is… the insurers pay in and that money is distributed to the insurance plans that take care of the sicker folks.

    The insurers, including many of these co-ops, expected a much more generous payment from the administration than they're receiving. And that has hurt their bottom line.


    So, what can the administration do to shore them up, or can — or is there — are there options?


    Well, for 10 of them at this point, they're folding. They can't enroll people in 2016. There are 23 co-ops. Ten are gone.

    So, for the other 13, perhaps the administration could do something, whether it's through their own administrative power or through working with Congress. Because, remember, this is affecting people's constituents. So, members of Congress are hearing about this. There's actually two congressional hearings that are going to happen next week.

    So, I expect there will be greater focus on this, looking at the co-ops that are still functioning and can they help them.


    So, as we wrap up, remind us again, when is this third annual enrollment period coming up? And any other advice for people who are looking at whether or not they should sign up?


    Open enrollment starts November the 1st, but you can get on healthcare.gov now and do some window shopping.

    If you want health insurance to start January 1, you need to enroll by December the 15th. People always kind of forget that. There is an administrative period that needs to happen to get your coverage going. And you can enroll through the end of January.

    So, another piece of advice, don't wait until the deadline. Everyone — we all love to wait for the deadline, but don't do that.


    That's me.


    Yes. Me, too. I'm a reporter. That's what we live by.

    But it would be important, if you're interested in this, I would encourage people to get on early and check it out. And if you need in-person assistance, get it. Look for a local enrollment event. Call the 800 number on healthcare.gov. Get the help that you need.


    So you can call that number and get help?


    You can call that number and get help.

    They say they have — they being the Department of Health and Human Services — says they have improved the functionality of not only the Web site, but to make sure those lines, those toll-free lines, are answered and that people know what they're talking about.


    Mary Agnes Carey with Kaiser Health News, getting everybody ready for this third period of enrollment, thank you very much.


    Sure. Thank you.

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