Obamacare Is A Disaster: Co-Op Insurers Across America Are Collapsing, And Now There Is Fraud

Tyler Durden's picture

Two weeks ago we reported that in what at the time was still a rather isolated incident, Colorado's largest nonprofit health insurer (aka co-op), Colorado HealthOP is abruptly shutting down, forcing 80,000 Coloradans to find a new insurer for 2016.

At the time, we said that the health insurer had been decertified by the Division of Insurance as an eligible insurance company because the cooperative relied on federal support, and federal authorities announced last month they wouldn't be able to pay most of what they owed in a program designed to help health insurance co-ops get established.

In other words, one of the 24 co-ops funded with Federal dollars and created to give more policyholders control over their insurers - especially those who wished to stay away from various corporate offerings, had failed simply because the government was unable to subsidize it: the same government that spends $35 billion in global economic "aid" but can't support its most important welfare program.

Fast forward to today, when we learn that another co-op, this time New York's Health Republic Insurance - the largest of the nonprofit cooperatives created under the Affordable Care Act - is not only shuttering, but was engaging in fraud.

The fate of Health Republic Insurance was first revealed a month ago when the WSJ reported it would shut down after suffering massive losses "in the latest sign of the financial pressures facing many insurers that participated in the law’s new marketplaces."

The insurer lost about $52.7 million in the first six months of this year, on top of a $77.5 million loss in 2014, according to regulatory filings. The move to wind down its operations was made jointly by officials from the federal Centers for Medicare & Medicaid Services; New York’s state insurance exchange, known as New York State of Health; and the New York State Department of Financial Services.


In a statement, Health Republic said it was “deeply disappointed” by the outcome, and pointed to “challenges placed on us by the structure of the CO-OP program.”


Health Republic has about 215,000 members, with about half holding individual plans and half under small-business coverage, a spokesman for the insurer said.

Today we learn that not only was this largest Co-op insolvent, it had also committed fraud. According to Politico, the collapsing insurance company that is creating headaches for hundreds of thousands of New Yorkers, misled state and federal officials about its finances, and will not be able to remain in business through the end of the year as originally hoped.

Because incompetence is one thing, but corruption: now that's real government work, right there.

The accelerated wind down is clearly a problem: the more than 200,000 customers insured with the co-op will lose their coverage Dec. 1, and must find a new plan by mid-November, according to the state and federal government. Health Republic insures about 20 percent of the state's individual market.

As Politico adds, the plan had been for Health Republic to make it through the end of the year. As recently as last week, company officials said there was enough in cash in reserve. But that apparently wasn't true.

Health Republic's finances are "substantially worse than the company previously reported in its filings," according to the state Department of Financial Services, which oversees insurance in New York, and the Centers for Medicare and Medicaid Services.

One wonders just how much of the over $100 million "lost" in under two years was due to incompetence, and how much due to pure embezzlement by the co-ops operators. Somehow we doubt we will find the anwer where this taxpayer money has gone.

This does, however, lead to a more serious question: the implosion of Health Republic is merely the latest in what has become an epidemic of governmental failure. In fact, there are a total of ten co-ops, all of which were created by the Affordable Care Act and seeded with billions in federal funding, that have now failed, leading to questions whether the entire business model underpinning Obamacare is unsustainanble for everyone but a select few corporations.

For some more thoughts on this disturbing, if perfectly predictable epidemic, we go to Forbes' Edmund Haislmaier who answers "Why Obamacare Co-Ops are failing at a rate of nearly 50%"

Cooperative health insurers (or co-ops) created under a federal grant and loan program in the Affordable Care Act seem to be falling like dominoes.


It started in February, when CoOportunity Health, which operated in Iowa and Nebraska, was ordered into liquidation. In July, Louisiana’s insurance department announced it was shuttering that state’s co-op. The following month brought news that Nevada’s co-op would also close. On September 25, New York ordered the shutdown of Health Republic Insurance of New York, which had the largest enrollment of all of the co-ops. Then, within the space of a week in mid-October, the number of failures doubled from four to eight, as state insurance regulators announced that they were closing the co-ops in Kentucky, Tennessee, Colorado, and one of the two in Oregon. Last week came news that South Carolina’s co-op will be closed, followed this week by the announcement that Utah’s co-op is also being shut down.


In sum, of the 24 Obamacare co-ops funded with federal tax dollars, one (Vermont’s) never got approval to sell coverage, a second (CoOportunity) has already been wound down, and nine more will terminate at the end of this year.


So what is behind this, so far, 46 percent failure rate?


To start with, the program was a congressional exercise in not merely reinventing the wheel, but doing a bad job of it.


Far from being a new idea, member-owned insurance companies—called “mutual” insurers—have a long history. For instance, life insurer Northwestern Mutual has been in business for over 150 years. Health insurers organized as mutual companies include, among others, Blue Cross plans in 10 states. Indeed, one of them, Florida Blue, converted into a policyholder-owned mutual company just last year. If having more health insurers owned by their policyholders was the goal, then there was no need for federal government action.


On the other hand, if the goal was to increase competition by stimulating the creation of new health insurers, then the ACA’s co-op program was, like other parts of the legislation, badly designed.


* * *


The program offered federal loans and grants to startup insurers but required that they be non-profits, not have anyone affiliated with an existing health insurer on their boards, and not spend any of their federal funding on marketing.


Co-ops are also subject to another provision of the ACA requiring all health insurers to pay out in claims at least 80 percent of premium revenues, or refund the difference to policyholders. By law, insurers can retain no more than 20 percent , out of which they must fund sales and administrative costs before booking any remainder as free cash. That significantly constrains a non-profit carrier’s ability to accumulate capital needed for growth, as it can’t raise funds through equity or debt offerings.


As if that wasn’t daunting enough, the law also required co-ops to focus “substantially all” of their activities on offering health insurance in the individual and small group markets—just as other provisions of Obamacare were thoroughly disrupting those markets by imposing new rules on insurers and complicated new payment arrangements for many of their customers.


Given all of the foregoing, 10 co-ops failing within two years is less surprising than the fact that 23 of them actually got to market in the first place.

As we pointed out two weeks ago, following this avalanche of failures, it will merely force even more individuals into plans offered by corporations, who as a result of the failure of their co-op competitors will have even more pricing power and premium hiking leverage.

Which means that "sticker shockers" such as the one below kindly informing them their health insurance premiums are rising by 60% crushing any desire to splurge modest "gas savings" on discretionary purchases...

... will only get worse, as the premium increase even more with every passing year, as more Co-Ops fail, as more of the publicly-held insurers merge, and as a single-payer system, one which benefits not taxpayers but a select handful of shareholders, becomes the norm.

Haislmaier's take: "The bottom line: Obamacare has made health insurance costlier and the business of offering it riskier. To survive in that new world, health insurers need to be cautious, or even pessimistic, and hope that their customers can continue to pay escalating premiums. It’s not a pretty picture."

It isn't but what are customers going to do: after all the "Affordable Care Act" is a tax (one which "boosts" GDP every quarter no less) and you must pay it by law; sadly the Supreme Court forgot that when it makes a service mandatory, corporations can charge any price they want. 

 And that's precisely what they are doing.

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Deathrips's picture

Its only a temporary solution for insolvency...aka more taxes on the pleebs.



Money Counterfeiter's picture
Money Counterfeiter (not verified) Deathrips Oct 30, 2015 5:16 PM

Healthcare was 20% of the cost it is today before the feds got involved in 1965.   Seems like one group of people write all the laws and get all the money.   Peculiar isn’t it.

insanelysane's picture

I'm sure they're non profit so it's ok.  All non profits do god's work.

Money Counterfeiter's picture
Money Counterfeiter (not verified) insanelysane Oct 30, 2015 5:33 PM

Goldman Sachs?   hmmmm

Muddy1's picture

FRAUD????? in a government program??????  I thought that only happened when we sent funds to third world countries like Afghanistan, Iraq, and ..... oh waitow I get it.  A third world country.

Beam Me Up Scotty's picture

Who cares about fraud and waste.  Its more important that we just fund everything we want to fund.  If the taxpayers have to pay a bit more, that OK.


Billy the Poet's picture

Hillary, Sanders and Trump all want some sort of socialized or single payer medical system. Where does Carson stand?

Keyser's picture

No surprises here as the ACA was designed to fail, taking down an important part of the US economy... The tip-off was the Pelosi policy of "having to vote for it before you can read it"...  Just like the TPP... Never have I witnessed so many organizations, federal agencies and politicians that are hell-bent of destroying the US... Now they want us to pay for a failed health care system to provide coverage for any and all illegal immigrants, including the US created refugees from the ME... 

Prior to leaving the USSA for good, I was paying $10,000 a year for a 70/30 plan with a $3500 deductible... Now, living as far away from the evil empire as I can, I pay $2100 per year for 100% coverage, zero deductible and all prescriptions paid... Fuck the corrupt system in the USSA, they can all go to hell... 

willwork4food's picture

Prey tell us..where do you live?

Cornfedbloodstool's picture

Hope you all enjoy your soup spoon full of Castor Oil for your cancers and what ails yah.

sun tzu's picture

Because if you're not paying $90,000 for three months of drugs in the US that costs $900 for the exact same drugs in many other countries, then your healthcare must be horrible. Where else but in America can you find so many people so stupid?

Save_America1st's picture

Gee, how can it possibly be????


And The Biggest "Contributor" To Q3 GDP Was...




and gee again...don't forget that this MASSIVELY ILLEGAL AND UN-CONSTITUTIONAL system is all about the MARXIST AGENDA "single-payer" BULLSHIT!!!!!!  TOTAL FED-GOV-SCUM HEALTHCARE LIE which is actually total SURVEILANCE of our entire lives!!!!!




REMEMBER!!!!  this is how they have wanted to do it to us for 150+ fucking years!!!!

And so, thusly...


"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague."


 Marcus Tullius Cicero - (106-43 B.C.) Roman Statesman, Philosopher and Orator





Save_America1st's picture

@ugly treasonous bird TROLL:   23 weeks, 2 days:  Wrong Answer, scumbag!  You aren't going to make it on this forum ever....move on.  And this is why:


MAKES YOU A FUCKING RETARD FOR EVEN SAYING THAT, YOU FUCKING PIECE OF SHIT.  FUCK OFF, YOU MARXIST, TREASONOUS, SOCIALIST SCUM!  WE DON'T TAKE KINDLY TO YOUR KIND 'ROUND HERE EVER!  You can take your statement and your bullshit link and your scumbag, socialist vomit and shove it all up your ass.

Because that's what real and true American Constitutionalists think of people like you, o-blah-blah, and Hitlery, and all the rest of you subversive, regressive, intollerant, anti-American, anti-Constitutional, treasonous fucking scumbags. 

Fuck off and go move to any of the other 150+ loser, scumbag, socialist, dead broke, loser countries around the world who don't have any clue how to prosper without treasonous, corrupt politicians and losers like you who support them!


Is America DEAD BROKE and going more broke by the day???  Fuck yeah we are!!!  But we here know that...we've known that for years now, and have been trying to reverse that course.  So if we can reverse this Socialist treason, then that not only helps America but also the rest of the world. 

The fucking problems are the treasonous, scumbag politicians not just in America but also around the world...as well as the scumbag banksters, the MIC, and all the other treasonous motherfuckers who work for all those assholes, as well as the scumbags like you.

And if all you assholes who want to take our guns think you can do it...well then, Molon Labe, motherfuckers!!!  Good luck, you fucking lungers.  Just keep trying to take our guns.   Cuz you won't get them ever until they are all empty and if you can manage to pry them from out cold dead hands!



Son of Loki's picture

Moar of Barry's Legacy and destruction of American middle class.

Odegaard Falls's picture

Settle down Suzy, our system in Canada might not be as expensive as yours, cuz that is apparently awesome to pay ton's of your income on a monthy basis for healthcare,  i'd rather have it deducted from my pay, and have good roads, decent social programs, and alright healthcare,  you just walk in give them your healthcard and your fixed and it doesn't cost you extra for a cast and x ray or whatever ridiculous amount of fiat you suckers pay.

Canary Paint's picture

Pathetic... If there were a hint of a coherent, long-term vision for the US in your spittle-laced diatribe, I would be inclined to listen.

Police and fire departments have tended to be in the public sector in the US. Does that make the US a socialist state? Does that make cops and firefighters and the people willing to keep that in the public sector traitors or marxists or whatever? Sorry, bud... It is not -ism vs. -ism anymore. When there is a near complete merger between corporate, financial and governmental institutions, where the hell are we supposed to know where capitalism and socialism begin or end?

The simple truth is that in many countries, single-payer systems do allow the government the leverage to negotiate better prices for medecine. Of course, many if not all of those countries have the same kinds of debt problems and the same kind of dingleberry politicians and economists running the country that we do in the States. Still, I think I would prefer my country to go broke because the common man can get medical treatment than for paying $100 per load of laundry to some crony, Deep State contractor in Iraq. Sort of amounts to picking your poison...

847328_3527's picture

The Supremes should be ashamed of themselves they did not nix this disaster when they had the chance. It shows they do not care about the American people either.

Not My Real Name's picture

According to the Fire Protection Association, 70% of US firefighters are volunteers.

83_vf_1100_c's picture

  I remain unconvinced by your argument. Perhaps if you used more Caps and bold?

geno-econ's picture

Single payer system would be most efficient, even if run by government that would have a 3% overhead cost,  Problem is it will never happen due to private insurance lobby, MD lobby and need to create healthcare jobs in a global economy where manufacturing jobs are vanashing.  Also general population is brain dead in believing one payer is socialism.  Therefore America is getting what it deserves in huge premium increases and rich getting tax loopholes and lower proportional taxes.  However their children and grandchildren will suffer under present system. But who cares, everyone is living for today in a debt ridden society thinking they are upper crust. DUH ! 

Overfed's picture

It's not a bug. It's a feature.

Hyjinx's picture

People forget that Americans are paying the cost of R&D for those drugs whereas other countries are negotiating a much lower pricer for them.  The pharmas are accepting that because they are making it up in America.  The compounds themselves cost nothing.  If pharmas were tougher outside of the US things would balance out.  However, I'm sure everyone on this board is of the "all pharmas are evil" and make poison BS.

Lurk Skywatcher's picture

Don't worry. TPPA and TPIP are going to make sure that all those free loading nations start to pay their fair share - but don't expect Americans to start paying less! Everyone else will just pay more. And pharma gets their patents extended as an added bonus. Equal oportunity profit taking. How's that for balanced out, motherfucker.

Keyser's picture

Hope you all enjoy your soup spoon full of Castor Oil for your cancers and what ails yah.

You've been drinking the koolaid too long if you think the US has the best medical care on the planet... In fact, the US ranks number 37 in health care... Where I live in Asia is a hub of medical tourism and the health care system is excellent... All prescription medications are available as in the US and at a fraction of the cost... 

dfwpike's picture

Yeah, and you probably live under a Communist regime.  Pick your poison.

Keyser's picture

Prey tell us..where do you live?

I live in Thailand now and could not be happier... 

Reichstag Fire Dept.'s picture

I'll stay in Canada for now. A gainfully employed single white male only has to pay around Cdn$1450.oo/ year to get swabbed on a regular basis. 

57-71's picture

Does not matter a rats ass where anyone stands.

Obama's plan was always socialized medicine and he has come very close to acheiving that with Obamacare.

If all the people enrolled in the failed co-ops don't re-enroll with someone else they will still be covered by Medicare. Fait accompli.

Keyser's picture

Which is what should have happened in the first place without nationalizing and mandating health care plans for everyone... Just put the indigents on Medicare and be done with it, but no, Barry and crew wanted to interject their version of reality and fuck things up even worse... 

FIAT CON's picture

I could hardly call it socialized medicine when you are forced to buy insurance from a private company.

 How much would general motors charge for a vehicle if you were forced to buy GM vehicles? ie no competitiion



Not My Real Name's picture

Call it what you want ... Obamacare allowed the government to be even more heavily involved than it was before and things are now much much worse and the system is broken. Even so, the Utopians here believe total government involvement through single payer is the real solution. Unbelievable, but a typical response from those who live in Fantasyland.


philipat's picture

As with anything, if you only look at the symptoms, you will never find a cure. America needs to examine WHY is it that its healthcare costs 20% of GDP when the rest of the developed world pays half that amount AND has better outcomes in terms of basic measures such as infant mortality, longevity etc.

Part of it is lifestyle-related but the "Fee for Service" model has never succeeded in controling costs anywhere in the world, especially in countries such as the US where Corporate corruption is rampant and litigation is common practise.

And of course the ONLY reason the Republicans did not, as promised, defund ACA when they took control of Congress is that ACA was written by their friends in Big Pharma, Insurance and Hospitals, who wrote it to their advantage. And Big Pharma's dirty little secret is that it makes 90% of its profits in one country alone, that country being of course The US. That is why if you read the annual reports of Pharma Companies, you will always find revenues broken down by geographical region but NEVER profits.

Compunding the issue is the belief amongst Americans, the result of years of propoganda, is that US healthcare is the best in the world when it clearly is not based on the facts. This prevents Americans from "Voting with their feet" and going overseas for healthcare. In many cases a nice medical vacation in Thailand, where the Specialists are ALL US trained and the private hospitals superb, the cost comes in at less than half US costs overall, including Business Class airfares and good hotels. You can make a start by buying drugs in Canada or Mexico. With a bit of research, generic drugs from a reputable manufacturer are of the same quality as the original Brand name drug and will cost a fraction, especially outside The US. Ins tead of paying a huge annual insurance premium, put some funds, perhaps half of the premium, into escrow to be used as needed as above.

It isn't actually rocket scoience but, like everything else, it requires some personal responsibility, research and action.

willwork4food's picture

Spot on. Obama promised that "No family's existing health care premiums would go up."

Ours went up $600/yr+.

Fucking lying cock-socking worthless Congressional scum/ president. Oh, & Fuck the NSA. You copy?

philipat's picture

PS. The vast majority of Primary care visits for coughs and sneezes are a complete waste of time and money, made generally becuase they are "Covered". And physicians typically ramp up the cost by running largely unnecessary tests, in part to ramp up their re-imbursables and in part to protect against malpractise suits. For the same reasons they will always prescribe the latest and most expensive brand name medicines.

So again do some research, there is a wealth of practical information available on the net, and self-medicate using (Preferably generic) OTC medicines. Most insurance premiums are wasted (Well, they are actually "Profits" for the Insurer) and do NOT consume more expensive hospital care so why pay tens of thousands of dollars for services and medicines which, with a bit of research, can be bougtt for a few hundred dollars.

Oracle of Kypseli's picture

Had some extensive blood work. The lab charged the insurance not knowing that I was not covered for that. The insurance claim from the lab was $1300. Once the lab claim was rejected, the lab sent me a bill for $370 which I negotiated down to $145 claiming that this was all I had clear on my credit card. They immediately accepted.

That is not as important as the following calculation. Had I had coverage for that lab work, I would have to copay 20% that would be $260 compare to $145. Insurances capitalize on human fear. 

philipat's picture

Typical experience. I rest my case, except to the extent that my estimate of 50% waste, corruption and inefficiency was conservative? From $1300 to $145 shows the amount of excess and corruption within the system.

Actually, the original concept of insurance as a "Risk Pool" remains essentially soung but it has, as with everything else, been corrupted by Corporate America. These Insurance Co=ops, even without Government subsidies, are essentially agood idea and should work except for:

  1. Corruption within. And:
  2. Corruption within the whole Healthcare system, whereby charges bear no relation to costs for anything. But because it is "Health" and because it is essentially a monoploy and because the "Consumer" is essentially "Uninformed", predatory pricing is in place. It's not like buyiong a sofa, where consumers can "Shop around". With Healthcare, they can't because they don't have enough knowledge. But again, actually, that need not be the case. A little time spent on research can reduce costs substantially. And:
  3. Remeber, Physicians are NOT Gods. I have been amongst them all my life and they are just people, some scumbags and some angels. SO treat them accordingly.
new game's picture

self insured-paygo, healthy to begin with(why wouldn't ya be-da), essential oils, organics, juice reularily and exercise. hello, exercise, repeat- exercise. fuck slobs and their cost to be "healthy". i refuse to pay for slobs that don't give a fuck about being healthy and expect health care to be subsidized by healthy payees.

merica is soooooooooooooooooooo fucked...

sun tzu's picture

The rest of the world pays less because we subsidize them just like we did with defense during the cold war. As for Americans shorter lifespan, it is almost 100% due to lifestyle. Where else in the world can you find so many greasy fast food joints? The US is the second most obese country in the world after Mexico. If you think that doesn't contribute to diabetes, cancer, and heart disease, then you are kidding yourself. 

Blano's picture

For the last few years I drive once or twice a year between Detroit and Dallas.  The endless amount of fast food joints just along the freeways just has me shaking my head. 

philipat's picture

Yes, as I noted, part of it, perhaps a large part of it, is lifestyle=related but it IS a little more complicated than that. The UK, which has a single-payer system and costs less tha half of The US system, and also has an obesity problem, still has far better outcomes in terms of the standard metrics. I suggest to you that half of the cost in The US is due to corruption, waste and inefficiency. I also put it to you that there is going to be an enormous healthcare crisis in The US on the coming years because the middle class is going to be denied healthcare cover by Corporations and will not be able to afford privare coverage. Health economics is more complex than you might believe.

Incidentally, please explain further just how The US is subsidizing healthcare for the rest of the world, other than by having its Pharma Companies screw the US population on drug prices, which is, I suppose, a type of "Subsidy", but mostly to the Corporate bottom lines. There is also the matter of Research Tax credits. But these could easily be changed if Congress was not being paid off by Big Pharma? And, in any event, I'm sure that you were not aware of either of these, so please do explain?

And the attitude of foreign Governments (Who have single-payer systems and control drug prices) towards that would be, fine, if the American population is so stupid to allow this to happen to itself, so be it. There are VERY few drugs, mostly in the cancer arena, which explains why Big Pharma is focused there, which cannot be bought as Generic versions for a fraction of the price. And in most countries indeed are so purchased. Unless you wake up to what is going on, you will continue to get screwed.

And if you believe it is ALL lifestyle, then the solution is simple: change lifestyles and stop buying Insurance?

ZD1's picture

Word has got round in Nigeria, Ghana, India, Pakistan and other 3rd world countries that it is possible to receive treatment on the UK taxpayer without restraint and cheaper than paying in their own countries.

With such open-ended spending in the UK, the predictable has occurred. The NHS faces a 30 billion pound deficit by 2020 and, according to Tim Kelsey, director for patients and information at NHS England, is set to "run out of cash."



NHS may be forced to abandon free healthcare for all, says Britain's top doctor as he warns service needs radical change.



post turtle saver's picture

spot on... drop the microphone, we're done here +1

stocker84's picture

"This is going to hurt you a lot more than it's going to hurt me, now ben dover cause you have an enima coming to ya."


For those who are over 30 and have forgotten what it's like to be utterly sophomoric...The above quote translates to: I'm still in highschool and it's difficult for me to respond with intelligent or helpful comments, but I still want to participate and I want to appear as if I SO get what is going on and also appeal to the other 13 year olds who post here... Never mind those with IQs higher than 100... it's funny right? Up vote me and I will continue to post useless comments... Down vote me and perhaps I will be forced think and post intelligently... until the latter happens, pull my finger.. Der-hert..

End translation. You're welcome.

lakecity55's picture

Mr President, what have you to say about the rash of insurance failures?

Fore! Get outta my way, sonny, I wanna birdie this hole!

Boris Alatovkrap's picture

"You like your corruption, you can keep your corruption"...

except, cannot even keep that in United Soviet Amerika.