Another Health Insurance COOP Bites the Dust

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from NCPA,

The Louisiana Health Cooperative is ceasing its operations at the end of the year. Earlier this year, CoOportunity Health, the largest health COOP, went out of business. In addition, a recent report found 21 of 23 COOPs had net losses in 2014, says senior fellow Devon Herrick of the National Center for Policy Analysis.

The COOPs (Consumer Operated and Oriented Health Plans) were created to function as a so-called “public plan option” under Obamacare. Their proponents hoped COOPs would function like nonprofit mutual insurance companies that would focus on the needs of people ahead of profits. They assumed health insurance COOPs could direct more of the premiums towards plan members’ medical needs but that’s not what has happened.

Self-dealing and conflicts-of-interest among the management team brought down the Louisiana COOP. This COOP had signed a multi-year contract for millions of dollars to pay consulting fees to a firm owned by the CEO.

COOPs have been plagued by various flaws:

– They do not have a competitive advantage.
– They did not possess historical actuarial data to set plan premiums.
– They did not have access to capital markets to back up losses.
– They started their operations with borrowed funds from the government (taxpayers’ money).
– They have been plagued by cronyism.

These organizations were clearly started to gain support from progressives, as many of them believe for-profit insurers are too profit-oriented. But every business, including non-profit ones, needs to earn a profit in order to thrive.

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