• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Side Effects: Obamacare's CO-OPs Put Taxpayer Dollars at Risk for No Good Reason

    Yet another provision of Obamacare is expected to cost taxpayers more than they expected. The House Energy and Commerce Committee recently sent a letter to the Centers for Medicare and Medicaid Services (CMS) asking for details regarding the probable loss of $3.1 billion out of the $3.4 billion in Obamacare loans to its Consumer Operated and Oriented Plan (“CO-OP”). The estimate comes from the President’s Budget Appendix, and the committee is considering rescinding funds that haven’t already been obligated.

    The Obamacare initiative gives CMS the authority to award $3.4 billion in loan subsidies to states to fund start-up costs and to help meet state solvency requirements for the health plans in the CO-OP initiative, The Committee’s letter explains that these loans are a bad investment for taxpayers: “[T]he amount of expected losses is estimated to be about $3.1 billion of the $3.4 billion appropriated (91 percent). These losses exceed the estimate HHS presented in its proposed rule.”

    The loss of taxpayer dollars is a serious concern. In addition, the committee also raises further concerns with CO-OP’s potential effect on the insurance market. The letter cites research showing that “Past instances of insurer insolvency demonstrate the severe negative impact on the insurance markets.”

    It’s also important to realize that Obamacare’s acronym is a bit misleading. The original term co-op stands for co-operative, meaning a private organization owned jointly by its members. Co-op insurance plans are policyholder-owned, nonprofit health insurance issuers that offer qualified health care plans to individuals and small groups in the states. They’ve actually existed for over a century, often called “mutual” insurers; they include major insurance companies such as Northwestern Mutual and State Farm.

    The Obamacare initiative is CO-OP, a deceptive acronym that really just represents another government program. Heritage expert Stuart Butler explains, “[The] CO[-]OP program has start-up funds provided by the federal government and allocated by a federal board. The new membership plan cannot even be an existing co-op organization.”

    Obamacare makes it more difficult for private co-ops to succeed. As Heritage expert Ed Haislmaier explains, “[T]he legislation expressly prohibits the most likely and sensible path to setting up a co-op insurer, namely, a divestiture or conversion by an existing health insurer…The only way to create one of the proposed co-op insurers is to start one from scratch—an inherently lengthy, uncertain, and expensive task.” The CO-OP program proves this with the estimated loss of $3.1 billion of its loan.

    Furthermore, this provision of Obamacare is a complete waste of tax dollars. If Congress did want to encourage member-owned health insurers, which is a reasonable idea, Haislmaier explains that a change in the tax code would suffice. Haislmaier writes, “[A] simple and almost no-cost change in tax law granting mutual health insurers tax-exempt status (the same as currently enjoyed by credit unions, which are essentially ‘cooperative’ banks) would suffice. But that is not the case under Obamacare.”

    Much like the rest of Obamacare, the CO-OP initiative is an example of how government distorts good ideas in health policy and wastes taxpayer dollars.

    Posted in Featured, Obamacare [slideshow_deploy]

    5 Responses to Side Effects: Obamacare's CO-OPs Put Taxpayer Dollars at Risk for No Good Reason

    1. Bobbie says:

      More than anything, Mr. Obama proves not to be trusted. Why is rescinding funds being considered and not happening? How come there are no disclaimers to indicate the government involvement when it comes to private companies turning into government entities without the (distorted by government) co-op acronym if it was ever trustworthy? Or businesses that act private only to find out we're paying the way? twice! This man and his many are crooks and fiends whose presence and ignorance is hazardous and unacceptable in America's government! Everything he's done and continues is only to confuse to destroy!

    2. HtmlSymbol says:

      Obama is stealing our tax $ laundering it thru these groups to support his own reelection; Stealing from capitalism to fund socialism.

      • Craig Casey says:

        Great observation, chicago style theft. His change was greater, blatant corruption. Obamacare funnels contracts like ICD-10 to an Obama donor. Over $3 billion was just "lost" funding a health insurance co op with ties to Obama. Directing taxpayer money to donors is a crime, when will they indict this thug? http://www.cobrahealth.com/Unaffordable.html

    3. QueenZel says:

      But, of course.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×