Hearing Description:
The House Committee on Oversight and Government Reform met to examine how co-ops were operating and where taxpayer money was going to sponsor them. Over $2 billion dollars had been pledged for Co-Ops and the consensus among the witnesses was many could be in trouble.
Hearing Date: February 5th, 2014
Hearing Summary: Prepared for AAPS by the Market Institute
The Oversight subcommittee met to examine the Affordable Care Act’s loan program for co-op’s across the country. Chairman Lankford (R-OK) said in his opening statement that the viability of the loan program is in question. Congress has recently rescinded funding for the program and even the administration is questioning it’s sustainability. Rep. Jackie Speier (D-CA) said in her opening statement that while she has respect for the Chairman, she believes this hearing is another attempt to discredit the ACA. She complained that the committee report was given to her 45 minutes before the hearing was scheduled. She would not participate in the hearing because of circumstances. Rep. Jim Jordan (R-OH) said in his opening statement the Obama Administration projects taxpayers could lose 40% of the loans given out to co-ops. .
The first witness, Devon Herrick, Senior Fellow at the National Center for Policy Analysis testified in his opening statement that co-ops were a political compromise during the healthcare debate in 2009. Whether they are economically viable is another question. They were dreamed up as a non-profit entity, but they have little chance of success. They operate in the most risky insurance markets and are subject to adverse selection. Health insurance co-ops are undercapitalized and are run by underwhelming management and he fully expects them to operate until they run out of taxpayer dollars.
The second witness, Roger Stark, Health Care Policy Analyst at the Washington Policy Center testified in his opening statement that co-ops are essentially health insurance companies starting from scratch that will require a large amount of private funds. Legacy insurers are having a tough time setting prices that conform to ACA mandates. Co-ops will have no idea how to set prices.
The third witness, Sara Horowitz, CEO at the Freelancers Union testified in her opening statement that her organization was well qualified as a sponsor of co-ops. After a successful launch of the Freelancers Insurance Company in New York, the Union was positioned to launch 3 independent co-ops on time and on budget. As a sponsor, they helped establish the co-ops, but do not own or operate them.
The fourth witness, Avik Roy, Senior Fellow at the Manhattan Institute testified in his opening statement that co-op plans were seen as a substitute for a public option and that as not-for-profit entities, they would offer lower premiums. Unfortunately, the way the co-op program was designed has fundamental problems. Co-ops will have difficulties developing a competitive product because they lack many traditional assets an insurer would have. Also, by starting from scratch co-ops are putting billions of dollars of taxpayer money at risk as well as the enrollees in the co-op if the it becomes insolvent.
The final witness, Jan VanRiper, CEO at the National Alliance of State Health Co-ops testified in her opening statement that in states where co-ops exist, premiums are lower. It is in everybody’s best interest for co-ops to be financially viable. It will take time for them to become completely self-sufficient. Some of the co-ops are garnering significant market share in their states. Others are struggling because of the number of competitive carriers, pricing, and problems with the exchanges.
In response to questioning, Sara Horowitz said:
- The co-ops received $340 million in taxpayer money
In response to questioning, Roger Stark said:
- He is concerned all 23 of the co-ops will be financially constrained and put the 2 billion dollars at risk
In response to questioning, Avik Roy said:
- Only a handful of states have seen lower premium rates; in 42 or 43 states, premiums are going up dramatically
Hearing Website:
http://oversight.house.gov/hearing/health-insurance-co-ops-examining-obamacares-2-billion-loan-gamble/
Links to Testimony:
Sara Horowitz, Executive Director at Freelancers Union
Click to access Horowitz_Testimony.pdf
Roger Stark, Policy Analyst at Washington Policy Center
Click to access Stark_Testimony.pdf
Avik Roy, Senior Fellow, Manhattan Institute for Policy Research
Click to access Roy_Testimony.pdf
Devon Herrick, Senior Fellow at National Center for Policy Analysis
Click to access Herrick_Testimony.pdf
Jan VanRiper, CEO at National Alliance of State Health Co-Ops