“If you like your health plan, you can keep it!” Except, it seems, if you were one of the over half a million people who enrolled in one of the Affordable Care Act’s (ACA) consumer-operated and oriented plans, or co-ops. These programs were created with the intention to offer a customer-focused and user-friendly approach to health care, but for most Americans – especially U.S. Hispanics – they more often than not were a letdown.
As of this week, 12 of the 23 ACA co-ops have shuttered their doors, forcing over 700,000 Americans to find new plans. There is not much hope for the few co-ops that are still standing, either – 22 of the 23 nonprofit co-op insurers were reported to have incurred net losses in 2014, even after receiving $2.4 billion in taxpayer support. The co-ops were supposed to create competition within the health insurance market, especially for consumers with fewer options, but as time goes on, it is increasingly clear that they are having the opposite effect. This government intervention into our health care system has brought escalating premiums and increased bureaucratic inefficiency, all at the expense of the American taxpayer, who is now forced to foot a $1.2 billion bill for the co-ops that have completely gone under.
The problem with the co-ops lies mainly in the terms and conditions outlined under the ACA. Member-owned insurance companies – better known as “mutual” insurers – are not a new idea, and have been able to succeed in the private sector without government help or taxpayer subsidies. These co-ops were intended to be user-friendly, non-corporate plans that would be responsive to residents’ needs instead of investors’ demands. However, in their haste to create more low-cost options, the Obama Administration overlooked several structural flaws.
Firstly, the ACA’s co-op program legislation contained a baffling list of requirements, demanding that newly formed co-ops must be nonprofits, that they must not have anyone affiliated with existing health insurers on their board, and that they must not spend any federal money on marketing. On top of that, they are severely constrained from accumulating the capital needed to sustain a business, because they are subject to another provision that requires them to pay out in claims at least 80% of premium revenues, or refund the difference to the health care policyholders. No smart business investor would agree to spend their money on a company if 1) their invested money could not be spent on marketing the company’s product; 2) there could not be people on the board who were experts in the field and might make informed decisions on how to spend said money, and 3) all of their overhead costs must be covered by only 20% of their revenues – yet, this is exactly what the federal government has agreed to do.
Another problem has been the fact that, in an attempt to gain market share, the co-ops underpriced their product. The ACA pushed hard to create an affordable health insurance option, and because of this many co-ops wanted to offer the cheapest plans on the federal and state-run exchanges. However, offering a plan at this very low rate came with its own set of consequences. All too often, customers had claims that exceeded their premiums, and the revenue from enrolling at these rates did not cover Obamacare’s enormous costs. Nearly all of the co-ops that are still standing are the ones that made the choice to not rely on future federal support – they got fewer customers because they refused to set their prices too low, but by doing so they avoided incurring large losses that would force them to shut down entirely.
All of these problems combined to create a situation that was far from beneficial for uninsured U.S. citizens, and for U.S. Hispanics. Latinos in America face unique challenges in their access to health care, including language barriers and increased wait times, and this has only been exacerbated by the numerous failings of Obamacare. Eight of the ACA co-op websites initially had no Spanish language version of their website, making it difficult for Hispanics to fully understand their options. In the time since the ACA has been implemented, Hispanics also have been waiting longer to see a doctor, as they are forced to spend more time on administrative concerns. The closure of the co-ops has made health care premiums more costly than ever, and many U.S. citizens – Hispanics included – will struggle to afford the remaining options. Obamacare was created with the intention to make it easier for all Americans to access health care, but the numerous complications have created the opposite result.
Obamacare makes health insurance more costly to buy and more risky to sell, and saddles Americans with increasingly high premiums. The failure of the ACA co-ops has cost the American taxpayer $1.2 billion so far, and that number is growing steadily higher. It is clearer and clearer that there are numerous problems with the ACA, and yet the Obama Administration is still refusing to amend or even acknowledge the flaws in the President’s signature legislation. Americans deserve better, and both Congress and the President have a responsibility to stop looking the other way and to address these rising concerns.