Obamacare Rules Change Opens Door For State Bailouts

Under the Affordable Care Act (Obamacare), the government spent $2.4 billion creating 23 non-profit healthcare cooperatives which were intended to help drive down health insurance costs through competition with for-profit companies.

As we noted, insurance premiums have subsequently skyrocketed, 12 of the 23 co-ops lost so much money that they had to shut down, and the remaining 11 lost a combined $400 million last year. So far, so good on the Obamacare front.

Now we learn, courtesy of The Daily Signal, that the Obama administration is changing the rules midstream so that the remaining 11 co-ops can have state governments place officials on their boards of directors, and make it easier to attract outside investors.

Said otherwise, the moves ultimately make a state bailout possible.

From The Daily Signal

The Obama administration is changing its rules for the remaining 11 co-ops started under Obamacare to now allow them to more easily attract outside investors, paving the way for states and large hospital systems to potentially inject cash into the struggling nonprofit insurers.

The Centers for Medicare and Medicaid Services issued an interim final rule last week allowing the remaining consumer operated and oriented plans, or co-ops, to solicit financing from private investors and allow state government agencies and investors to place lower-level officials on the co-ops’ boards of directors.

Allowing states to exercise some control of the co-ops’ governance provides them with an incentive to give the nonprofit insurers a much-needed infusion of cash, Ed Haislmaier, a senior fellow in health policy at The Heritage Foundation, told The Daily Signal.

“It makes it easier for a state to put somebody on the co-op board [of directors] in exchange for giving them a bailout because they could under this rule put a state employee or state official [on it], probably someone with expertise,” he said. “That might make a bailout more palatable.”

Considering the fact that 12 of the 23 co-ops have closed their doors, thus losing taxpayers roughly $1.2 billion, it is difficult to imagine states wanting to jump in and infuse the remaining 11 with cash. Then again, bailouts remain a distinct possibility, as losing taxpayer money is precisely what the government does best.